Dominican bonds fall after tax reform withdrawal

Santo Domingo.- Bloomberg reported yesterday that the withdrawal of the tax reform bill, which aimed to restructure the tax system and increase revenue collection, led to a decline in Dominican bonds. President Luis Abinader had predicted that this drop would be temporary.

According to Bloomberg, “Dollar notes accelerated losses in emerging markets on Monday, with those maturing in 2060 losing as much as 2.6 cents on the dollar, trading below 90 cents.” The reform sought to raise revenue by 1.5% of GDP by raising income, corporate and property taxes while reducing incentives for the film and tourism industries.

Credit rating agencies have also reacted. Fitch Ratings and Moody’s have rated the Dominican Republic three points below investment grade, while S&P Global rates it one level higher at BB. Seaport Global stressed to clients that the withdrawal is a significant setback to the country’s goal of achieving investment grade status during the Abinader administration. Uncertainty remains about how fiscal consolidation will be achieved, despite limits on primary spending in real terms.