Possibility of activating the Vehicle Circulation Tax

September 15, 2021

On September 14, 2021, the “elCaribe” published a commentary of Héctor Linares on the possible activation of the license plate tax.

1. Debate on activation of the vehicle circulation tax

The Government’s decision on the activation of the Vehicle Circulation Tax (plate) is not yet defined. It has only been proposed within a range of possibilities that the technicians of the Ministry of Finance and the DIGEPRES (Dirección General de Presupuesto – General Directorate of Budget) have studied and reflected in the report “Macroeconomic Panorama 2022” they submitted last July.

2. Official proyections

In the projections made by the Ministry of Finance and Digepres experts for the revenue policy analyzed for 2022, there is no solid decision. It is neither approved nor rejected. Only the topic has been explored. “There is a possibility of implementing some of the pending actions for the execution and application of Law No. 253-12 on the Strengthening of the State’s Collection Capacity for Tax Sustainability and Sustainable Development dated November 9, 2012,” says the analysis submitted as a report to the Senate.

3. License plate tax in sight

It is not identified which taxes would be activated, but in the different years in the mandates of Law 253-12, the license plate tax, the mono-tax, among others, have been identified. These are the taxes with the highest collection capacity, so it is inferred that these are the taxes the tax authorities are targeting because, in addition to the collection yield they imply, they do not need congressional approval but activation.

4. Yield from the license plate tax

The license plate tax is the highest yielding of the taxes mentioned. When the proposal was presented in the second half of 2012, collection projections amounted to over RD$5,000 million. The collection potential should now be greater because the vehicle fleet is more modern with more expensive varieties, which could pay between RD$20,000 and RD$90,000 per year. The current cost of renewing the tag or license plate is RD$1,500 for vehicles more than five years old and RD$3,000 for those five years old or less. In 2013, when the application of the 1% Vehicle Circulation Tax was scheduled to begin, the DGII published a chart with the values and costs of plate renewal for the different models and vehicle brands. The first plate has a cost of 16% of the value, established in substitution of an exchange commission that existed at the time the DR-Cafta came into force, but its application clashed with the concept of tariff reduction provided for in the treaty.

5. Context

The revenue policy preliminarily defined by the Ministry of Finance and the Digepres reflects that the collection projection for the 2022 fiscal period is subject to the existing economic conditions in the world and local economy, as reflected in the latest update of the Macroeconomic Outlook assumptions, agreed upon by the Ministry of Economy, Planning and Development, the Central Bank, and the Ministry of Finance.  

This projection considers the recovery of the Dominican economy and collections due to the gradual reopening of economic activities, as well as the monetary and tax incentives policies that have reversed the trend of the contractionary cycle of tax revenues. Based on this context, they preliminarily project fiscal revenues for 2022 for RD$815,596.0 million, equivalent to 14.5% of GDP for a 6.4% increase.

Source: El Caribe 14/09/21