Identifier
Created
Classification
Origin
04SANTODOMINGO5153
2004-09-15 18:46:00
UNCLASSIFIED
Embassy Santo Domingo
Cable title:  

DOMINICAN TAX REFORM AND TELECOMS

Tags:  ECPS BEXP EFIN DR 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SANTO DOMINGO 005153 

SIPDIS

DEPT FOR EB/CIP AMB GROSS, WHA/CAR, WHA/EPSC;
USDOC FOR 4322/ITA/MAC/WH/CARIBBEAN BASIN DIVISION
USDOC FOR 3134/ITA/USFCS/RD/WH; DHS FOR CIS-CARLOS ITURREGUI

E.O. 12958: N/A
TAGS: ECPS BEXP EFIN DR
SUBJECT: DOMINICAN TAX REFORM AND TELECOMS

REF: SANTO DOMINGO 0596

UNCLAS SANTO DOMINGO 005153

SIPDIS

DEPT FOR EB/CIP AMB GROSS, WHA/CAR, WHA/EPSC;
USDOC FOR 4322/ITA/MAC/WH/CARIBBEAN BASIN DIVISION
USDOC FOR 3134/ITA/USFCS/RD/WH; DHS FOR CIS-CARLOS ITURREGUI

E.O. 12958: N/A
TAGS: ECPS BEXP EFIN DR
SUBJECT: DOMINICAN TAX REFORM AND TELECOMS

REF: SANTO DOMINGO 0596


1. Embassy Santo Domingo thanks Department for information
about meeting on September 7 with Verizon concerning the tax
package currently before the Dominican congress, as well as
the September 14 message detailing efforts to date by
telecoms companies in Santo Domingo.

2. The Ambassador received Verizon president Jorge Ivan
Ramirez at short notice on August 24 on this subject.
Ramirez outlined concerns of all telecoms firms concerning
the proposal to enact an excise tax of 10 percent on telecoms
services; he described the industry counterproposal of an
excise tax of 6 percent and a lowering of the "telecoms
development tax" from 2 percent to 1 percent. Ramirez
stressed the firms' view that the demand for their services
is elastic, and the 10 percent tax would not be likely to
collect any more revenue than the lower tax proposed by the
companies. A lower tax would have fewer adverse effects on
demand, system development, and company earnings. He left a
one-page paper outlining these concerns.


3. The next day, during his courtesy call on newly appointed
Finance Minister Vicente Bengoa, the Ambassador outlined
these concerns to the Minister, particularly noting the
projected revenue scenarios. The Minister heard him out but
made no comment on the administration's approach to the bill.


4. Submitting a tax proposal to COngress was a July
requirement of the currently inactive IMF agreement. The
proposal was jointly elaborated by PLD and PRD last June and
delivered to the House of Representatives on July 11. The
House was in continuous session until August 15 on the
subject, conducting public hearings and gathering comments;
the contents of the package were altered substantially during
this process, both by the administration drafters and by the
House. We understand that the telecoms firms argued for the 6
percent telecoms tax alternative and were expecting that the
House would accept their approach.


5. The House reconvened after the August 16 inauguration,
and after further hearings the House approved its modified
version on September 2. The House retained the 10 percent
tax. The bill has been in the Senate since that date; it was
voted out of committee on September 14, without change, and
approved by the full Senate that day in the first of two
required votes. The Senate is scheduled to meet next of
September 16 to decide whether to finish consideration of the
bill.


6. The USG is working with both the executive and the
legislative branches in the Dominican Republic, stressing
that the version now before the Senate should be modified and
returned to the House for further consideration. The Charge
and embassy officers have conveyed this view to the president
of the Senate, to the head of the PRD party, which controls
the Senate, and to the president of the Senate Trade
Committee. Further contacts are scheduled. If the Senate
does modify and return the current bill, the House may accept
Senate modications, kill the bill, or originate an
alternative version. If on the other hand the Senate
approves the House draft of bill, the legislation is
submitted to the President for his consideration during a
period of 8 days. The President may object to all or part of
it and return it to congress; he may aprove; or he may make
no comment, in which case the bill becomes law.
KUBISKE