The Dominican Republic is set to implement significant changes to its tax system with a recent proposal aimed at increasing taxes on alcoholic beverages and sugary drinks. Announced by President Luis Abinader and Finance Minister José Manuel “Jochi” Vicente, the “Fiscal Modernization” tax reform seeks to enhance government revenue by targeting non-essential goods that contribute to health issues. President Abinader mentioned that the tax reform would include tweaks to taxation and public spending, aiming to improve the educational system, healthcare, and police reform, while protecting the nation’s most vulnerable. Read more

Key highlights of the proposal include a rise in the specific tax on alcoholic beverages to RD$840 per litre of absolute alcohol, with quarterly adjustments based on inflation. Additionally, the ad valorem tax will increase from 10% to 11%, directly impacting the cost of alcoholic drinks, especially those with higher alcohol content. The previous specific tax was RD$724.12 per litre.

Minister Vicente emphasised the global trend, noting that 75% of countries with selective taxes on sugary beverages opt for specific taxes. The government also plans to align with international standards by renaming the Tax on Transfers of Industrialized Goods and Services (ITBIS) to Value Added Tax (VAT).

These measures are designed not only to augment tax revenue but also to address the health implications of consuming alcohol and sugary drinks—products deemed non-essential and detrimental to public health. Vicente remarked that “alcohol taxation has the most untapped potential” among health-related taxes, and the reform aligns with broader government efforts to modernise the tax system while ensuring equitable tax distribution.

Public response has been overwhelmingly supportive, with many citizens expressing approval for the tax hikes as a means to reduce alcohol-related harm. José Luis Cedeño, a resident of Villa Juana, stated, “I think it’s good to raise the price of rum. We drink too much here, and people don’t want to work. Now, if you want to drink [alcohol], you’ll have to work.”

In stark contrast, industry lobbyists have voiced their opposition, fearing that increased taxes may lead to diminished sales and profits, despite the potential public health benefits.

Support from international organisations further bolsters the Dominican government’s initiative. Movendi International advocates for higher alcohol taxes and offers resources to support such public health measures. The World Health Organization (WHO) recently highlighted a global deficiency in alcohol taxation, calling for greater implementation of excise taxes to mitigate alcohol-related harm.

Research underscores the effectiveness of alcohol taxation in reducing consumption and generating substantial societal benefits. A landmark 2023 study identified alcohol policy and taxation as among the most effective interventions to achieve Sustainable Development Goals (SDGs). It estimated that implementing these measures could prevent 150,000 alcohol-related deaths over the next decade, with a remarkable return of $76 in societal benefits for every dollar spent.

While the proposal is waiting for discussion and possible approval from the National Congress, the Dominican Republic is taking a positive step in public health. The aim is to change its tax system and encourage healthier lifestyles for its people.

Source: Movendi