Dominican Republic Tax System Review

Dominican Republic Tax System Review

Despite decades of impressive economic growth, tax revenues in the Dominican Republic (DR) remain well below the regional average. The DR’s tax base is extremely narrow, with extensive exemptions, deductions, zero-ratings, and allowances across all...

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Bibliographic Details
Main Author: World Bank
Format: Policy Note
Language:English
Published: World Bank, Washington, DC 2021
Subjects:
TAXATION
CORPORATION INCOME TAX
PERSONAL INCOME TAX
ENTERPRISE TAXATION
INDIRECT TAX
TAX INCENTIVE
PROPERTY TAX
ENVIRONMENTAL TAX
Online Access:http://documents.worldbank.org/curated/en/579421623998524780/Dominican-Republic-Tax-System-Review
http://hdl.handle.net/10986/35858
id okr-10986-35858
recordtype oai_dc
spelling okr-10986-358582021-06-30T05:10:49Z Dominican Republic Tax System Review World Bank TAXATION CORPORATION INCOME TAX PERSONAL INCOME TAX ENTERPRISE TAXATION INDIRECT TAX TAX INCENTIVE PROPERTY TAX ENVIRONMENTAL TAX Despite decades of impressive economic growth, tax revenues in the Dominican Republic (DR) remain well below the regional average. The DR’s tax base is extremely narrow, with extensive exemptions, deductions, zero-ratings, and allowances across all major tax categories. Tax expenditures amounted to an estimated 4.8 percent of gross domestic product (GDP) in 2020, of which value-added tax (VAT) exemptions alone accounted for 2.5 percentage points. High levels of tax noncompliance and low tax morale further diminish revenue collection. An excessively complex and overly generous array of tax incentives weakens the performance of corporate income tax (CIT) while doing little to advance the government’s economic development objectives. A high eligibility threshold and various exemptions narrow the personal income tax (PIT) tax base. Tax reforms should be phased in over time with broad public support. In the current macroeconomic climate, the sudden withdrawal of the debt-financed fiscal stimulus will have deeply negative repercussions. Tax reform is subject to a variety of political, economic, and administrative challenges that must be addressed as part of a broader fiscal strategy that provides predictability to the private sector and enjoys substantial public support. In parallel, the government must ensure that it has adequate administrative capacity to offset the impact of measures that may adversely affect poor and vulnerable households. The government’s fiscal strategy should reflect the lessons of the international experience, and it should be informed by a thorough and detailed analysis of the economic and distributional implications of tax reform. 2021-06-29T15:36:18Z 2021-06-29T15:36:18Z 2021-01 Policy Note http://documents.worldbank.org/curated/en/579421623998524780/Dominican-Republic-Tax-System-Review http://hdl.handle.net/10986/35858 English CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Economic & Sector Work Economic & Sector Work :: Policy Note Latin America & Caribbean Dominican Republic
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
language English
topic TAXATION
CORPORATION INCOME TAX
PERSONAL INCOME TAX
ENTERPRISE TAXATION
INDIRECT TAX
TAX INCENTIVE
PROPERTY TAX
ENVIRONMENTAL TAX
spellingShingle TAXATION
CORPORATION INCOME TAX
PERSONAL INCOME TAX
ENTERPRISE TAXATION
INDIRECT TAX
TAX INCENTIVE
PROPERTY TAX
ENVIRONMENTAL TAX
World Bank
Dominican Republic Tax System Review
geographic_facet Latin America & Caribbean
Dominican Republic
description Despite decades of impressive economic growth, tax revenues in the Dominican Republic (DR) remain well below the regional average. The DR’s tax base is extremely narrow, with extensive exemptions, deductions, zero-ratings, and allowances across all major tax categories. Tax expenditures amounted to an estimated 4.8 percent of gross domestic product (GDP) in 2020, of which value-added tax (VAT) exemptions alone accounted for 2.5 percentage points. High levels of tax noncompliance and low tax morale further diminish revenue collection. An excessively complex and overly generous array of tax incentives weakens the performance of corporate income tax (CIT) while doing little to advance the government’s economic development objectives. A high eligibility threshold and various exemptions narrow the personal income tax (PIT) tax base. Tax reforms should be phased in over time with broad public support. In the current macroeconomic climate, the sudden withdrawal of the debt-financed fiscal stimulus will have deeply negative repercussions. Tax reform is subject to a variety of political, economic, and administrative challenges that must be addressed as part of a broader fiscal strategy that provides predictability to the private sector and enjoys substantial public support. In parallel, the government must ensure that it has adequate administrative capacity to offset the impact of measures that may adversely affect poor and vulnerable households. The government’s fiscal strategy should reflect the lessons of the international experience, and it should be informed by a thorough and detailed analysis of the economic and distributional implications of tax reform.
format Policy Note
author World Bank
author_facet World Bank
author_sort World Bank
title Dominican Republic Tax System Review
title_short Dominican Republic Tax System Review
title_full Dominican Republic Tax System Review
title_fullStr Dominican Republic Tax System Review
title_full_unstemmed Dominican Republic Tax System Review
title_sort dominican republic tax system review
publisher World Bank, Washington, DC
publishDate 2021
url http://documents.worldbank.org/curated/en/579421623998524780/Dominican-Republic-Tax-System-Review
http://hdl.handle.net/10986/35858
_version_ 1764483920635625472

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