Dominican Tax System Reform Examined during UN Panel

On Wednesday April 22, the Global Foundation for Democracy and Development (GFDD) and its sister organization Fundación Global Democracia y Desarollo (Funglode) hosted a panel discussion on tax reform as a trigger for development. The event took place  as part of the official launch of the in-house publication entitled “The 2012 Dominican Tax Reform in Historical and Regional Context” by Dr. James Mahon, GFDD Fellow and Woodrow Wilson Professor of
Political Science at Williams College, Massachusetts. Attendees gathered in Conference Room 6 of the General Assembly Building for a presentation of Dr. Mahon’s work during which he commented on the disappointing effects of the 2012 reform, despite extraordinarily favorable political conditions at its initiation. His presentation was followed by a panel discussion with several others experts from UN Agencies.

Semiramis de Miranda, GFDD Projects and ICT Director, provided the words of welcome thanking the Permanent Mission of the Dominican Republic to the United Nations for its support in putting together the event. She emphasized the importance of the research work carried out by Dr. Mahon in the summers of 2013 and 2014. Semiramis noted that the  publication
“could not have come at a better time” given the fact that the new Dominican government “had just come into office and had passed a tax reform in 2012”. She also stressed there had been a need for research into the dire predictions issued by economists who had ”forecast a massive transfer of private debt into public debt” and observed that “the subsidies to the electricity sector had continued to drain the
country’s finances”. Thanking Dr. Mahon profusely for his insightful publications, Semiramis praised Dr. Mahon as a well-regarded GFDD Fellow who had been accepted into the program “because he would provide new and practical information regarding tax reform in the Dominican Republic.”

Next, Marc Jourdan, GFDD UN Representative and moderator of the session, formally introduced the distinguished participants to the audience. The
speakers included the key note presentation by the author of the GFDD publication, Dr. James Mahon, UN policy expert Michael Lennard, Chief of the International Tax Cooperation Section at UN DESA, and Gail Hurley, UNDP Policy Expert on Financing for Development. The speakers took an in-depth look at the issue of tax reform and provided general remarks on its importance as a spur to the sustained development of developing countries and the increase of government revenue.

Dr. Mahon provided clarifications on the findings of his publication stressing that the “proliferation of tax exemptions have robbed tax systems in the Dominican Republic of their buoyancy”. Explaining that there seems to be today a lack of confidence by the general public in the tax system of the Dominican Republic, Dr. Mahon pointed to the fact that further reforms should seek to consolidate the management of current tax institutions in the country to ensure
that tax collection is monitored more effectively.  He emphasized that we need to reverse this trend whereby, despite economic growth, tax revenue in relation to GDP does not seem to be increasing. He concluded his intervention stressing that we have the opportunity to reform the tax system further by simply building on the aspirations contained in the Dominican Republic’s 2012 National Development Strategy, such as the streamlining of tax institutions by merging the Customs
Department with the country’s Inland Revenue Service and ensuring better enforcement of tax obligations.

Michael Lennard from UN DESA provided his insight on the efforts being made at the international level to move towards the idea of increasing country income through taxation. He explained that currently multinational businesses manage to continue avoiding corporate taxation based on residency technicalities. In light of such abuses he stressed that there was
a global call to set up “an international tax framework that requires more transparency and better reporting on a country level in order to see where profits are being made.”

Gail Hurley from UNDP concurred with Michael Lennard explaining that a predominant part of the work of UNDP had revealed that “illicit financial flows averaged 46% of GDP across Least Developed Countries.” Referring to the example of the extractive industries,
she stated that governments in developing regions with high levels of natural resources rarely seem to see any revenue stay in the country.  Calling for enhanced transparency she pointed to several tips laid out by UNDP in an effort to address these illicit flows, including better transparency and the development of local economies. Concluding her intervention, Gail pointed to the current opportunities laid out in the draft document of the 3rd International Financing for Development
Conference, stressing the need for enhanced participation of all countries in international decision making and norm setting. She highlighted that civil society organizations like GFDD and Funglode are key players in applying that can apply the right kind of pressure on governments for such reforms to take place.

The interventions by the panelists were followed by an interactive question and answer session with the audience, during which the guests provided further
remarks on problems related to the monitoring of tax revenue flows and the ongoing issues of misappropriation of funds by organizations, stressing that civil society engagement in the process was key for effective change to happen.

Concluding the meeting, Semiramis de Miranda thanked attendees and panelist for taking part, and reminded them that they could visit the GFDD website at http://www.globalfoundationdd.org/ to find out more about the publication.

About Dr. James E. Mahon
Dr. James Mahon conducted research through the Fellows Program in 2013-14. He is a Professor of Political Science and Political Economy at Williams College in Williamston,
Massachusetts, and a researcher at the Woodrow Wilson Center in Washington, DC. During his fellowship with GFDD/FUNGLODE he conducted research on the political economy of tax reform in the Dominican Republic under the guidance of Germania Montás, former deputy director general of the Dirección General de Impuestos Internos (DGII). Prior to his fellowship, he presented several publications that include the book Mobile Capital and Latin American Development (Penn State Press, 1996), an
article on the causes of tax reform in the Latin American Research Review, 2004, and a working paper titled Tax Incidence and Tax Reforms in Latin America.

In 2012, a fiscal reform took place in the Dominican Republic which had great impact in civil society and the future of fiscal policy formation.  In 2013, during his first trip to the Dominican Republic with the Fellows Program, Dr. Mahon presented his first paper related to this topic titled La tributación en la
República Dominicana y la reforma de noviembre de 2012 en el contexto regional y global. The newest version of this project focuses on the role of civil society and the corporate sector in the tax reform process.

About InteRDom and Fellows Program
Established in 2005 by GFDD and FUNGLODE, InteRDom has since become the leading internship, research and academic study program in the Dominican Republic. It fosters and promotes professional,
academic, scientific, technological and cultural exchange of students and professionals in public, private and non-profit organizations of the Dominican Republic. As an extension of InteRDom, the Fellows Program was designed to respond to the desire of GFDD and FUNGLODE to develop a community of scholars that contributes to the Foundations’ growing body of research on matters of international concern that directly impact the Dominican Republic. In addition, through the Fellows
Program, the Organizations seek to generate scholarship on issues at the forefront of the United Nations’ agenda in order to give voice to national and regional concerns and offer viable solutions to domestic and international challenges.

Related Links:
http://www.drfellowsprogram.org/