NewsWhore
12-10-2009, 04:50 PM
Writing in today's Listin Diario, economic advisor to the Central Bank Olga Diaz Mora explains how come Central Bank figures show growth when Tax Department (DGII) indicators have declined. She was challenging recent comments by Andres Dauhajre, former economic adviser to the Hipolito Mejia government. She says that there are no contradictions between CB and DGII stats. She explains that the economy responded to the prudential monetary measures that were adopted at the end of 2008 and throughout 2009, which enabled the country to mitigate the effects of the US financial crisis.
"As I have explained on previous occasions, a country's economic growth is measured in constant prices. For this reason it is incorrect to use the sales reported by the DGII at current prices and compare those to the value added of activities at constant prices, especially in the light of the low levels of inflation reported this year".
She says that no country uses the sales tax levels of economic activities to calculate economic growth. She explains that the DGII records are not automatically comparable with how the Gross Domestic Product is measured because reported sales only include companies that are paying taxes and in the national accounts.
Following recommendations of the National Accounts Manual SCN93, the Central Bank quantifies all the transactions in the economy, including informal businesses that do not pay taxes and that employ 56% of the active labor force in this country.
She complained that Andres Dauhajre selectively used indicators to reflect the least growth and confuse readers by presenting a scenario of economic recession.
Among the measures that activated the economy, she mentions: liberalization of the exchange reserve to stimulate financing of farming, construction, local manufacturing and small business sectors, for their effect on the creation of jobs and economic reactivation. She said this resulted in a decline in the interest rate, and the recovery of the financing of the private sector that grew by RD$33 billion between April and November 2009, which is a reflection of the economic growth registered in the first nine months of the year.
Furthermore, she highlights that the farming sector was one of the most dynamic sectors of the economy, but this is not reflected in DGII stats because this sector does not pay taxes.
She makes the point that tax revenues were down because of a decline in consumer goods imports for US$1.58 billion, while at the same time there was an increase of 30% in imports of goods that were exempt from paying taxes, according to the Competitiveness Law and other laws.
More... (http://www.dr1.com/index.html#7)
"As I have explained on previous occasions, a country's economic growth is measured in constant prices. For this reason it is incorrect to use the sales reported by the DGII at current prices and compare those to the value added of activities at constant prices, especially in the light of the low levels of inflation reported this year".
She says that no country uses the sales tax levels of economic activities to calculate economic growth. She explains that the DGII records are not automatically comparable with how the Gross Domestic Product is measured because reported sales only include companies that are paying taxes and in the national accounts.
Following recommendations of the National Accounts Manual SCN93, the Central Bank quantifies all the transactions in the economy, including informal businesses that do not pay taxes and that employ 56% of the active labor force in this country.
She complained that Andres Dauhajre selectively used indicators to reflect the least growth and confuse readers by presenting a scenario of economic recession.
Among the measures that activated the economy, she mentions: liberalization of the exchange reserve to stimulate financing of farming, construction, local manufacturing and small business sectors, for their effect on the creation of jobs and economic reactivation. She said this resulted in a decline in the interest rate, and the recovery of the financing of the private sector that grew by RD$33 billion between April and November 2009, which is a reflection of the economic growth registered in the first nine months of the year.
Furthermore, she highlights that the farming sector was one of the most dynamic sectors of the economy, but this is not reflected in DGII stats because this sector does not pay taxes.
She makes the point that tax revenues were down because of a decline in consumer goods imports for US$1.58 billion, while at the same time there was an increase of 30% in imports of goods that were exempt from paying taxes, according to the Competitiveness Law and other laws.
More... (http://www.dr1.com/index.html#7)