Dominican Republic pushes for tax increases to offset surge in oil prices

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SANTO DOMINGO, Dominican Republic (AP) — The Dominican government said Thursday that it plans to increase or implement new taxes to generate some $800 million in additional revenue a year to offset a surge in oil prices blamed on the Iran war.

The proposals include a 30% income tax hike for three years on companies in the Caribbean country that earn more than $17 million a year. Other proposals include a $10 increase on airline tickets and additional taxes on casinos, gambling and electronic cigarettes.

The administration of President Luis Abinader also proposed to impose customs taxes on certain imports and monitor items including cigarettes and alcoholic beverages.

To ease the financial burden on the most impoverished, the government said tax exemptions would apply to micro-enterprises and those earning less than $680 a month. The country of 11.6 million people has a 17% poverty rate.

The Dominican Congress, which is dominated by Abinader’s party, is scheduled to debate the proposals but are expected to approve them.

Shortly after the announcement, a group of Dominican business leaders who belong to the National Council of Private Enterprise suggested that the government focus on the informal sector and broaden the tax base to increase revenue without affecting those who already pay their taxes.

“There is a significant opportunity to strengthen fiscal sustainability by broadening the tax base, reducing tax evasion and informality, and correcting situations of unfair competition that currently place thousands of companies and workers who fully comply with their tax, labor and regulatory obligations at a significant disadvantage,” the council said in a statement.

Currently, the government allocates weekly subsidies to avoid passing on the rising cost of fuel to the population and prevent spiraling inflation. So far this year, the government has allocated some $350 million in fuel subsidies, representing a burden on the Caribbean nation’s economy.

Officials estimate they will need an additional $400 million for the remainder of the year if the price of West Texas Intermediate crude remains between $90 and $100 per barrel. WTI is a U.S. benchmark.

“The current situation demands responsible decisions to preserve stability, reduce debt pressures, and prevent the most vulnerable population from suffering disproportionately from an international crisis that we did not create,” said Magín Díaz, minister of finance and economy, as he announced the proposals.

The proposals are expected to go into effect in January 2027.