NewsWhore
09-12-2011, 04:30 PM
Economist Bernardo Fuentes wonders out loud what the recent tax reform that significantly increased the tax burden on business and individuals in the Dominican Republic was about if the government was endeavoring to secure more flexibility from the IMF all along. He concludes that the government could have wanted the tax reform to be able to meet the deficit with the IMF, and have plenty of funds to spend in a presidential electoral year.
Recently, President Fernandez said: "We managed to convince the Fund to give us some respite, and in recent times, it seems that our cries have been heard and this will enable us to boost spending in the Dominican Republic".
Analyzing the comments, Fuentes speculates:
After analyzing the words of President Fernandez, I think there may be two options. First, it may be that the government has negotiated an increase in the fiscal deficit target for 2011 with the International Monetary Fund (IMF). A second option would be to assume that the deficit remains unchanged and that the President is referring to an increase or the boosting public spending in the second half, he writes.
He continues: "I could be wrong but it seems the more feasible option is the first and I will explain why. According to data released by the Central Bank in its economic report for the first half of the year, the central government deficit in the first six months of the year was RD$20.68 billion, which is slightly below the target agreed with the IMF for the period that was RD$21 billion. Assuming these numbers as good and valid, we must take into consideration that the goal in the present agreement with the IMF for the central government deficit in 2011 was RD$33.500 billion. So, while in the first six months of the year produced a deficit of RD $20.68 billion, the deficit in the second half cannot exceed RD$12.82 billion.
"This is the main reason why I assume, to talk of a revitalization of spending, would mean the government has agreed with the IMF to increase the deficit target for 2011.
If I am right and increased the deficit target, the big question that all Dominicans should ask is: Why tax reform that was passed just three months ago?"
The government had argued it needed the increased tax revenues to meet the deficit target set with the IMF.
Fuentes has another explanation: "The alternative second option would be to assume that the deficit remains the same and this would imply that the expected increase in revenues following the tax reform would be used to increase public spending in the same magnitude. This option seems feasible given that the Government has just submitted to Congress amendments to the Budget for 2011 to just state that the increase in revenues (generated by the tax reform) will be used to increase public spending on education, while the target unchanged deficit."
He wraps up his comments: "Basically, what would be happening would be a transfer of resources from the private sector to the public sector. It seems uphill to assume that those resources in public hands would be used more productively than if they were being used by the private sector".
More... (http://www.dr1.com/index.html#4)
Recently, President Fernandez said: "We managed to convince the Fund to give us some respite, and in recent times, it seems that our cries have been heard and this will enable us to boost spending in the Dominican Republic".
Analyzing the comments, Fuentes speculates:
After analyzing the words of President Fernandez, I think there may be two options. First, it may be that the government has negotiated an increase in the fiscal deficit target for 2011 with the International Monetary Fund (IMF). A second option would be to assume that the deficit remains unchanged and that the President is referring to an increase or the boosting public spending in the second half, he writes.
He continues: "I could be wrong but it seems the more feasible option is the first and I will explain why. According to data released by the Central Bank in its economic report for the first half of the year, the central government deficit in the first six months of the year was RD$20.68 billion, which is slightly below the target agreed with the IMF for the period that was RD$21 billion. Assuming these numbers as good and valid, we must take into consideration that the goal in the present agreement with the IMF for the central government deficit in 2011 was RD$33.500 billion. So, while in the first six months of the year produced a deficit of RD $20.68 billion, the deficit in the second half cannot exceed RD$12.82 billion.
"This is the main reason why I assume, to talk of a revitalization of spending, would mean the government has agreed with the IMF to increase the deficit target for 2011.
If I am right and increased the deficit target, the big question that all Dominicans should ask is: Why tax reform that was passed just three months ago?"
The government had argued it needed the increased tax revenues to meet the deficit target set with the IMF.
Fuentes has another explanation: "The alternative second option would be to assume that the deficit remains the same and this would imply that the expected increase in revenues following the tax reform would be used to increase public spending in the same magnitude. This option seems feasible given that the Government has just submitted to Congress amendments to the Budget for 2011 to just state that the increase in revenues (generated by the tax reform) will be used to increase public spending on education, while the target unchanged deficit."
He wraps up his comments: "Basically, what would be happening would be a transfer of resources from the private sector to the public sector. It seems uphill to assume that those resources in public hands would be used more productively than if they were being used by the private sector".
More... (http://www.dr1.com/index.html#4)