Santo Domingo.- With the withdrawal of the fiscal reform project from the National Congress announced by President Luis Abinader, the nation is heading towards a new stage of conversations. The president admitted that the desired consensus was not reached around the proposal, prompting the government to reconsider the scope of the tax reform.
The decision was welcomed with satisfaction by various sectors of Dominican society, who interpreted this gesture as a favorable attention to their concerns. However, the reflection arises: what would have been the impact in certain areas if the project had remained active?
Tourism industry
The tourism industry had expressed its concern about the adverse repercussions it would suffer with the elimination of the incentives established in the Law of Promotion of Tourism Development (CONFOTUR). Tourism companies argued that these incentives are fundamental to maintain the sustainability and competitiveness of the country in front of destinations with similar fiscal policies.
David Llibre, president of Asonahores, mentioned that the lack of incentives would put the Dominican Republic in an unfavorable position compared to other nations in the region. He highlighted that tourism significantly contributes to tax revenues and foreign investment attraction, representing 12 times the tax expenditure of the sector. Without these incentives, capturing new investments and promoting hotel projects in key areas such as Punta Cana would be impracticable.
Film industry
Canceling 11 articles of the Law 108-10 for the Promotion of Cinematographic Activity, as proposed by the Fiscal Modernization Project, would have been a significant blow to the Dominican film industry and its contributions to the creative economy.
According to the Dominican Association of Professionals in the Film Industry (Adocine), such a measure would have precipitated the collapse of the film industry.
UNESCO data indicate that the creative economy contributes 3% of the global GDP and employs over 30 million people worldwide. In the Dominican Republic, film impacted the economy with over RD$10,197 million in 2023, with 120 productions carried out, including 75 national and 45 foreign, of which only 12 accessed the fiscal incentive.
For 2023, the Intersectoral Council for the Promotion of Cinematographic Activity (CIPAC) approved incentives valued at RD$15,905 million for 117 national and foreign projects, generating 6,659 direct jobs, 225,212 hotel nights, RD$740 million in gastronomy, RD$1,051 million in transportation, RD$1,171 million in ITBIS, and RD$355 million in ISR retentions.
By August 2024, CIPAC had approved incentives of RD$776 million for 12 projects, resulting in 316 direct jobs, 16,230 hotel nights, RD$71 million in transportation, RD$42 million in food and beverages, and RD$66 million in ITBIS.
In 2023, foreign investment in cinematographic productions exceeded RD$12,817 million, according to the study Impact of the Cinematographic Sector in the Dominican Republic, carried out by the General Directorate of Cinema (DGCINE), Apricus Consulting Group, the United Nations Development Programme (PNUD), and the Ministry of Industry, Trade and Small and Medium-Sized Enterprises (MICM).
This report indicates that 87.6% of the industry’s suppliers are micro and small businesses, which contribute to employment generation in the locations where productions are filmed, collaborating in poverty reduction.
Hans García, president of Adocine, stated that the Fiscal Modernization Project proposal meant “extermination for the Dominican film industry”.
García indicated that more than 25,000 jobs would be lost and over 375 film services companies would be affected, many of which have invested heavily in infrastructure and equipment.
He also mentioned that this would leave film professionals and over 1,200 university students without a professional development area.
Regarding the annual foreign investment that this industry attracts, he highlighted that “last year we exceeded $200 million, with an average of $150 million in the last five years”.
Despite this, García emphasized the importance of tax reform and the increase in state revenues, showing himself open to dialogue between the sector and the government to find mutual benefits.
The renowned actor and producer Danilo Reynoso stressed that “film is the most followed cultural activity in the Dominican Republic”.
According to official figures, during the validity of the Cinema Law, the state has disbursed over RD$16,000 million, of which a quarter is automatically reinserted through ISR retention and ITBIS collection.
During the same period, state coffers collected over $650 million, approximately RD$38,000 million in total.
“That’s why we have always sought to dialogue with the government to negotiate. As an industry, we are prepared to review what is necessary”, emphasized Reynoso. “Culture is the soul of the nation, and film, its mirror”, he concluded.
Entrepreneurship
The fiscal reform would have severely impacted entrepreneurship, especially with the revocation of the ITBIS exemption and the selective consumption taxes on imports less than $200, known as “De Minimis” shipments. This situation would have forced small entrepreneurs, who depend on low-cost imports, to assume additional taxes, increasing their expenses and reducing their profit margins.
According to Article 67 of the project, imports valued at less than $200 would be subject to the Selective Consumption Tax and ITBIS, negatively impacting those who depend on these exemptions for their businesses.
If the fiscal reform had not been withdrawn, essential sectors such as tourism, film, and entrepreneurship would have suffered a devastating impact, putting not only their future development but their long-term existence at risk.
Eliminating the fiscal incentives that have served as pillars for the advancement of these sectors would have placed the Dominican Republic in a clear disadvantage compared to its regional competitors, threatening to reduce foreign investment, employment generation, and innovation in fundamental areas for the country’s economic progress.
credits of the images of this post: Deultimominuto.net
