NewsWhore
10-18-2011, 01:40 PM
The former manager of the Central Bank, Apolinar Veloz said yesterday that the losses that the commercial banks will suffer due to the 1% tax on their financial assets will make credit more expensive and increase inflation. He said that the measure keeps many businesses from gaining access to a cheap credit, and if they do get the credit, it will have an impact on the prices of the goods and services that are produced.
"As a result, this generates inflation, and what is the fundamental objective of the Central Bank is to control this variable, and it will be very difficult to achieve. In fact, we have 7.5% inflation accumulated as of September and it is expected to reach 10% by the end of the year," the economist said.
"I believe that the commercial banks made a pact with the government and accepted this temporary tax for the sake of the supposed macro-economic stability," he said.
He added that the agreement has it effects on consumption and investment and the only thing it produces is a reduction in the growth of the GDP. He continued by saying that as interest rates go up, the long term consumption (durable goods consumption) which is to say cars, houses, and appliances that are financed by commercial banks will be more expensive and therefore will have to be reduced leading to a reduction in consumption and investments.
Veloz said the tax will have a negative effect on consumption and investment. He mentioned the fall in the aggregate demand that will be seen in the reduction of the GDP.
Regarding the dispute between the Department of Taxes (DGII) and the banks on the collecting of 1% on company interest earnings, he said that the DGII has been inefficient in controlling tax evasion and now wants the banks to become tax collection agencies. He added that, according to the regulations of the DGII, they can decide that any private business can become a tax collector, but there are legal provisos in the Monetary Law, which is the one that covers the financial sector, that say that this regulation cannot be applied and because of that the Central Bank is backing the financial system that seeks the measure be revoked.
The president of the Bank Association (ABA), Jose Manuel Lopez Valdes, said that because of the 1% tax on assets the banks will lose RD$5 billion of their projected RD$12 billion in profits, and this worries the sector.
More... (http://www.dr1.com/index.html#7)
"As a result, this generates inflation, and what is the fundamental objective of the Central Bank is to control this variable, and it will be very difficult to achieve. In fact, we have 7.5% inflation accumulated as of September and it is expected to reach 10% by the end of the year," the economist said.
"I believe that the commercial banks made a pact with the government and accepted this temporary tax for the sake of the supposed macro-economic stability," he said.
He added that the agreement has it effects on consumption and investment and the only thing it produces is a reduction in the growth of the GDP. He continued by saying that as interest rates go up, the long term consumption (durable goods consumption) which is to say cars, houses, and appliances that are financed by commercial banks will be more expensive and therefore will have to be reduced leading to a reduction in consumption and investments.
Veloz said the tax will have a negative effect on consumption and investment. He mentioned the fall in the aggregate demand that will be seen in the reduction of the GDP.
Regarding the dispute between the Department of Taxes (DGII) and the banks on the collecting of 1% on company interest earnings, he said that the DGII has been inefficient in controlling tax evasion and now wants the banks to become tax collection agencies. He added that, according to the regulations of the DGII, they can decide that any private business can become a tax collector, but there are legal provisos in the Monetary Law, which is the one that covers the financial sector, that say that this regulation cannot be applied and because of that the Central Bank is backing the financial system that seeks the measure be revoked.
The president of the Bank Association (ABA), Jose Manuel Lopez Valdes, said that because of the 1% tax on assets the banks will lose RD$5 billion of their projected RD$12 billion in profits, and this worries the sector.
More... (http://www.dr1.com/index.html#7)