The Catch-22 of fuel taxes

[NewsWhore]

There appears to be a structural failure in the Hydrocarbons Law 112-00. The DR is hurting under the burden of its increasing oil import bill, but ironically, the government benefits when more fuel is sold. Thus, the government has ironically little incentive to discourage gas consumption, as reported in Listin Diario. In the DR, 12.5% of all government revenues (RD$88.7 billion) come from fuel taxes. During the first four months of the year taxes on fuels yielded RD$5.96 billion in revenues, while the 16% ITBIS (VAT) tax on fuel yielded a total of RD$5.2 billion during that same period of time. This is a total of RD$11.15 billion in fuel taxes for the first four months of the year. Listin Diario estimates that at this rate the DR will collect a total of RD$45 billion on fuel taxes alone, making them the state's third largest revenue generator. Some sectors have asked the government to reduce the taxes on fuel as a way of easing the crunch on consumers, while others have argued that this would only lead to increased consumption. But the Economy Minister Temistocles Montas and Hacienda Minister Vicente Bengoa have said "no way," because they have already factored in that these taxes will go to pay for the also increasing foreign debt.

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