During an interesting seminar convened at FUNGLODE, a prominent researcher from the Woodrow Wilson Center in Washington, DC, James E. Mahon Jr., explained the need for countries to be conscious about the importance of efficient social spending that emanates from incoming tax revenue. Speaking at a roundtable discussion, organized by Fundación Global Democracia y Desarrollo (FUNGLODE) and its sister institution in the United States, (GFDD) through its Initiative Fellows Program, Professor Mahon said,”We have to take a more efficient and politically sustainable approach to taxing, and then spend on goods and services that benefit the less affluent households. The legitimacy and feasibility of raising taxes depends on having the confidence that it is well spent, and it implies a model of mutual benefits in exchange for revenue.”
During the discussion panel, entitled “Fiscal reform of the political economy: two focuses”, Mahon, Professor of Political Sciences at the University of California argued that the tax systems of Latin American countries do not re-distribute enough for its citizens because they depend, above all, on consumption taxes, while income taxes are very low. He further explained that, on average, revenues from property taxes in rural and urban areas of Latin American are 0.37% of gross domestic product (GDP).
Also integral to the panel discussion was Mrs. Germania Montas, former deputy director general of the Direccion General de Impuestos Internos (GDII). Mrs. Montas referred to Law 253-12, ahead of the National Development Strategy (END for its acronym in Spanish), and said that according to the 2014 projections, this legislation will not generate significant change in the share of direct tax revenues.
“We had previously said that, Law 253-12 aimed to increase the tax burden from 1.6% to 1.8% of GDP. However, the projected results for 2013 and 2014 show that the burden of tax will remain virtually unchanged. By 2013 there is a projected level of 13.58%, for 2014 a 13.07%, and the 2015 target is 16%,” she lamented.
She explained that the goal was not reached because the fiscal reform that took place in November should have produced RD $40 million, and was estimated to reach less than half. He said that reaching a tax burden of 24% by 2013 is a goal too optimistic for Dominican reality.
The talk by the two experts took place on Friday July 26th, and was attended by former president of the Dominican Republic and Honorary President of FUNGLODE and GFDD, Leonel Fernandez, the executive director of the institution, Marco Herrera, GFDD Executive Director in New York, Yamile Eusebio, former Internal Revenue CEO, Juan Hernandez,and economists and students.