The Dominican Republic, like the nations of Latin America, must pay attention to the evolution of the consensus of 140 countries to establish a new international tax system which will bring with it great complexities, will force the design of new regulatory frameworks and will entail new compliance costs.
The proposal was made by the international tax advisor Alberto Barreix, specialist who has worked for the Inter-American Development Bank (IDB), during a magisterial conference sponsored by Macro Ideas, an initiative of the consulting firm Ecomod, led by the economist Magín Díaz, with the support of Mediáticos, a communication consultancy directed by the journalist Victor Baptist.
Barreix warned that given the option of the countries to continue with an autonomous tax policyBy ignoring the consensus that occurred in the fourth quarter of 2021, it assumes the risk of undermining its international commercial and financial integration.
The expert referred to two pillars that, from 2024, could become international conventions of voluntary adherence: first of all, it involves introducing a mechanism for sharing the “extraordinary” profits generated by the approximately 120 "mega” larger multinationals and, as a second approach, implement a minimum corporate income tax on multinational groups.
The first option covers large companies with at least US$120 billion in revenuewhich would contribute to the treasury of the countries where they have a market share, even if they do not have a physical presence.
“This so-called pillar number 1 is basically applied to digital mega-companies and consists of determining their global consolidated balance sheet and that the taxable base be distributed according to the percentage of sales in each country over the global sales of the group,” Barreix highlighted.
He stressed that, in return, it would be prohibited to the countries that adhere to the agreement the application of taxes to digital services, which confronts them with the dilemma of participating or not. “This is very relevant because these are the leading companies in the knowledge economy (informatics, artificial intelligence, robotics, social networks, and the Internet of Things, among others),” he argued.
The speaker, who spoke to an audience made up of representatives of the country’s main companies, government technicians and independent professionals, said that the second pillar consists of implementing a minimum business income tax for multinational groups with sales of more than €750 millions.
It is, as reported, about 8,000 companies, which will be subject to a minimum tax of 15% on accounting profit. “Therefore, if a country waives taxing 15% of the accounting profit obtained by the multinational group in its jurisdiction, the parent company’s country has the right to charge the multinational up to said 15%. It is about preventing it from continuing to be possible to reduce the tax burden by transferring profits to countries with low or no taxation”, stressed the specialist.
In that context, Barreix argued that the advisability of establishing a national minimum tax should be analyzed, to avoid ceding collection to third jurisdictions due to the establishment of this global minimum tax. He considered that, in addition, it will be necessary to review the tax incentives used to encourage investment.
He appreciated that these proposals present significant challenges, since income tax becomes more complex with the inclusion, along with the general regime, of various special regimes: mega-companies, affected by pillar number one, large multinational groups taxed by pillar two ; all types of incentives and simplified schemes.
From the expert’s point of view, this complexity will increase taxpayer compliance costs and administration control costs.
“Additionally, It seems necessary to complement this new taxation with a regulatory framework that protects consumer rights, data privacy and the defense of competition, taking into account that the knowledge economy has as an element in question the human being himself, in particular his privacy and his biology”, he pointed out.
The first installment of Macro Ideas Conferences was sponsored by important brands and companies in the country, such as AES Dominicana, Consorcio Energético Punta Cana Macao (CEPM), Grupo Martí, Grupo Rica, Inicia, Mar Constructora and Brugal.