Adopron considers that progress has been made through the efforts of the public and private sectors; however, there is “a kind of perverse incentive” for illicit trade.
The local rum industry is in a vulnerable situation, for which it requests the support of sound public policies on surveillance and tax burden that correspond to the reality of that sector, state the directors of the Dominican Association of Rum Producers (Adopron).
With the tax reform (Law 253-12) approved at the end of 2012, taxes on Dominican rum almost doubled and became the highest in Latin America, causing a 30% fall in formal production and increasing the illicit trade, commercialization, and consumption of adulterated beverages in the country.
The entity asserts that the Dominican beverage has enormous potential to be recognized as a quality product, but it needs adequate surveillance of the domestic market, in addition to the elimination of progressive taxes.
While participating as guests at HOY's Economic Encounter, Circe Almánzar, official spokesperson for Adopron; Jorge Miñoso, business consultant; and Ysidro García, technical coordinator for Adopron, said that the entity is working on two fundamental purposes, which are strengthening the Denomination of Origin (DO) and reducing illicit trade to zero..
She affirms that progress has been made; however, there is “a kind of perverse incentive” for illicit trade due to excessive taxes.
Considers that the tax burden the local rum industry has had since 2012 is beyond what it can bear.
Puntualizan que desde ese año se evidencia que el sector está en una situación “muy vulnerable” que puede provocar una disminución en el volumen de las recaudaciones de impuestos.
Before the Law 253-12 the tax burden on rum was around 40%, increasing to as high as 70% on some types of that beverage with the implementation of the reform.
In addition, they highlight, that measure established a specific tax that has about 70% of the weight, which is why it has been dynamically indexed for inflation.
The directors of Adopron warn that this tax burden creates an informal market, elasticity of consumption, and collection inefficiency, which has been evident since 2017 when the private sector, along with State entities, began to design strategies to combat illicit trade and dismantle organized mafias that caused losses to the treasury of more than RD$13 billion.
They point out that Adopron is not opposed to paying taxes, but rather that it must be taken into account that taxes on alcoholic beverages have two main objectives: to collect revenue and to compensate for negative externalities or the impact on health from irresponsible consumption.
However, they emphasize that with the 2012 tax reform, these two objectives are not being met because less revenue is collected. They cite as an example that in 2023, the lowest tax collections were recorded when compared as a percentage of the Gross Domestic Product (GDP) in the last 20 years, in addition to the fact that between 2020 and 2021, more than 400 people in the country died from consuming adulterated alcohol.
Meanwhile, in countries in the region, the tax rate on distilled beverages is around 32%; in the Dominican Republic, it is 49%, with rum being the product with the highest tax burden in the country, they specified in a conversation with Hoy.
