Tax Rectification Project: The Perspective of Tourism Sector
Enrique E. De Marchena Kaluche
Last Tuesday, President Fernandez made a speech that fully surprised the public and left everyone speechless. The reasons are several and very powerful.
Just a year ago, in November 2005, the tourism sector, represented at the time by local and international investors of the hotel and gastronomy sectors, as well as union representatives, had signed, in the National Palace, the “Pacto para el Desarrollo Sostenible del Sector Turismo” (Agreement for the sustained development of the tourism sector). By means of this agreement, the tourism sector accepted the 2005 Tax Reform, in an environment of dialogue and democratic compromise propitiated by President Fernandez himself
This Agreement was intended to encourage the Nations’ development through the tourism sector, taking into account the connection favored by the tourism area to other sectors of the economy such as agriculture, cattle farming, construction, banking, telecommunications, transportation, etc.
By that time, the Dominican Agricultural Business Board (JAD) stated that the estimated income generated by the tourism sector to the agricultural sector exceeded US$300 millions on an annual basis.
I wonder what would be the position of the construction sector if the boom generated by the tourism sector (by means of the construction of hotels) had not existed. I also wonder what would have happened to the source of construction materials the country represents, encouraging the building of second dwellings.
After this huge step towards consolidation of the tourism sector, with the advantage of President Fernandez’s regular meetings with the national tourism sector and its main partners —the major Spanish hotel owners—, and thanks to the joint efforts of the public and private sectors, an important construction period started. Some examples of the success of these efforts are the boulevard of Punta Cana, which has been so important for the country that, in the future, it will be considered one of the main successes of the current administration.
Under the circumstances, when the discussion on the so called tax rectification project started, the tourism sector made three bets and lost, at least, the first round.
The first bet contemplated the fact that the President would remember the Agreement signed in the National Palace only a year ago, and would consider the huge benefits the Tourism sector has generated for the country, in terms of investment, foreign currency generation and jobs creation.
This year will end with more than 4,0 million tourists arriving to Dominican Republic, 1,8 million tourists coming from North America; plus 3,5 billion dollars generated by tourism. More than 150.000 direct jobs had been generated and the accrued investment in tourism by the private sector has reached 6,0 billion dollars.
All the abovementioned has to be taken into account along with the 200 million dollars invested by President Fernandez’s administration in public infrastructure in the tourist centers. This investment policy reinforces his image of wise manager of the public issues, who “invests the money where money creates profit”.
The second bet considered the fact that President Fernandez is a fierce democrat who, even in the worst of circumstances of the relationship with IMF demands, would call for compromise and dialogue.
The third bet contemplated the fact that President Fernandez would perceive the respect of the Tourism sector to his words “what it is not known cannot be criticized”. Asonahores did not take a stand until he was familiar with the tax rectification project, but he was not reciprocated.
What is the result of this? A project of tax creation that results in an attack to the stability and survival of the sector that —being designed to tax it directly and indirectly as a whole— leaves no room to maneuver when: the overvaluation of the Dominican peso beyond its parity level is a “hidden tax” for the exporting sectors; the energy cost in the country is the highest in Latin America and spoils the profitability and competitiveness of the tourism business, being the main expense of hotels and restaurants in the country; the high prices of primary supplies will become even higher. What will happen with the industries of Santo Domingo, Juan Dolio and Puerto Plata, where tourism centers that have taken off thanks to the joint investment of the public and private sector? The centers will sink again. What will happen in Samaná, a place of extraordinary potential? Will it become the next Icaro, who cannot fly? What will happen to the important tourism-related real estate projects in the country, which aim to enhance the national tourism income and the average expenditure by tourists in the country? Some of these projects will remain unfinished.
Confusion is even bigger when one reads the daily reports of the contradictions between the actors of this disaster, including the IMF. As an example: “They denied that tourism companies will suffer any damage” while simultaneously saying that “they will meet to study a less traumatic solution for the tourism sector”. Therefore, the Government does recognize that “the formula is very traumatic”.
Summing up, the project for the creation of new taxes is unpopular for its lack of consistency and, especially, balance. Even worse, if the project is passed as it is submitted to this date, it will not balance the national budget, on the contrary, it will end with the development and stability goals achieved by the Government to this date, through deactivation of investment and production.
In these circumstances, similar to the ones last year, when we heard all this kind of rumors and did not pay attention, our trust relies on the fact that the President of the Republic —a visionary man and a guarantee of national stability— will think it over and implement the proper solution. A balanced and convenient solution for all the Dominican people.
Source: http://www.listindiario.com.do/cuerpos/ciudades/tribuna.htm