Guarocuya Félix states that the impact of the IPI on state revenue is negligible

Guarocuya Félix states that the impact of the IPI on state revenue is negligible
Bayahibe, La Romana, June 28, 2014

He assures that considering a thorough reform of the national office of land registry as the beginning of the fiscal pact is the only thing that will ensure the stability of the country’s tax structure.

The Director General of the Internal Revenue, Guarocuya Félix, said today that the impact of the Real State Taxes (IPI – Impuesto a la Propiedad Inmobiliaria) in the internal revenue is for all purposes negligible. Therefore, he proposed that a discussion on a fiscal pact in the Dominican Republic takes place and begins with a thorough reform of the national office of land registry.

To illustrate what he calls the “virtual absence” of said tax, he explained that in the countries that are members of the Organization for Economic Cooperation and Development, property tax accounts for 2.8% of the Gross Domestic Product (GDP). In Latin America the same tax accounts for only 0.8% of the GDP of the region. But when referring to the Dominican Republic, he said that it is negligible.

To explain the case in nominal terms, he disclosed that the IPI provides some RD$1,364,000 per year, a little more than the US$35,000,000 a year for a local GDP of US$58,000,000.

Félix made a presentation at the Seventh International Symposium on Cadastre in Ibero-America, held in Bayahibe and organized by the Permanent Committee on the Ibero-American Cadastre and the National Cadastre of the Dominican Republic, with the participation of 18 guest countries, among them the United States, Portugal, Argentina, Spain, Colombia, France, Costa Rica, Brazil, and Chile.

He stated that the only taxes that make the fiscal structure of the State sustainable are those related to property because they are not subject to the economic cycle. He warned that if there is no good management of property taxes in general, there will always be a poor fiscal and tax structure.

He said that the biggest challenge the country has in terms of the definition of a fiscal policy is to have a better articulation between taxation and land, a link that does not exist right now.

“This is a pending issue and we all know that the articulation of the State begins with the Cadastre. If we do not have a good Cadastre, we cannot effectively articulate the fiscal structure of the country”, said Guarocuya Félix.

To further support his position regarding the low impact of property taxes in the country, he explained that we must take into account that the city of Santo Domingo has 3,500,000 inhabitants of the more than 10,000,000 of the country population and that it accounts for 90% of the total tax revenue. If we break down the tax collection to establish the impact of the IPI in the country, Santo Domingo provides 97% of the US$35,000,000 per year, noting that the participation of the rest of the country does not exist.

He recalled that the National Development Strategy instructs the signing of three major pacts, the education pact that has already been signed, the one about the electric industry, but the first one should have been a fiscal pact that would allow the sustainable development of medium and long term policies. He added that the fiscal pact should start with a major reform of the national Cadastre, which would result in the greatest impact of the Tax Administration.