Fiscal Sector

Financial Policy is know as the group of measures taken by the Government to collect the necessary taxes at all levels to carry out all the functions required of the public sector. Its main objective is to promote stability and also to promote a certain flexibility within its economic system.

In the Dominican Republic, fiscal policies in the 1990s were based around strong adjustments to achieve stability. With the main objective being to increase the competitiveness and improve the efficiency of gross domestic product, the authorities initiated a series of measures to initiate a Customs Reform being able as such to liberalize the economy and as a result obtain a diverse array of incomes for the country. 

From that moment, favorable results were achieved, above all in terms of fiscal deficit and income from business and commercial taxes.

According to the following graph, the proportion of income from taxes as a percentage of Gross Domestic Product, or tax contributions, has remained constant despite microeconomic variations suffered by the Dominican Economy during the period 1995-2003. As one can see, the average tax contribution in the Dominican Republic in the last decade reached 15%. This favorable trend is due to a series of economic policies and reforms carried out by the Government, among them, the passing of the Taxation Code of 1992, reforms to the foreign investment system (Law 16-95) and the implementation of the Hydrocarbons Law (Law 112-00), among others.

 

The following table shows the evolution is numerical terms, that is to say, in current pesos, of the Budget in the Dominican Republic:


Budget 1996-2002

(In RD$MM)

 

1996

1997

1998

1999

2000

2001

2001

Current Income

26,174.6

34,180.2

38,316.3

42,692.7

51,203.2

59,641.9

67,119.6

Capital Income

713.8

1,228.0

1,210.9

4,004.7

2,949.5

8,625.6

10,348.4

Total Income

26,888.4

35,408.2

39,527.2

46,697.4

54,152.7

68,267.5

77,468.0

Current Expenditure

13,887.2

22,500.4

25,832.1

30,983.3

30,455.2

42,880.6

47,337.9

Capital Expenditure

13,803.9

12,161.4

14,123.2

17,775.5

17,812.0

24,195.4

29,259.8

Total Expenditure

27,691.1

34,661.8

39,955.3

48,758.8

48,267.2

67,076.0

76,597.7


Source: Ministry for Finances


In reference to current income and expenditure as a percentage of gross domestic product (See graph), which displays the total income and expenditure, it can be seen that this has remained relatively constant over the last few years. 

In relation to the deficit of the national public financial sector (SPNF) as a percentage of domestic product, we can see that following a surplus in 1999 it has turned to a deficit of 2.4% in 2004 according to statistics from CEPAL. This increase in the deficit is mainly due to late payments of national debt, a product of the crisis of 2003-2004.

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