The Dominican government recently unveiled its “Fiscal Modernization” tax reform proposal, led by President Luis Abinader and Finance Minister José Manuel “Jochi” Vicente. The reform aims to increase taxes on alcoholic beverages and introduce new taxes on sugary non-alcoholic drinks.
During the presentation, Finance Minister Vicente highlighted that 75% of countries with selective taxes on sugary beverages use specific taxes. He also announced the government’s plan to rename the Tax on Transfers of Industrialized Goods and Services (Itbis) to the Value Added Tax (VAT) to align with international tax standards.
Two main tax increases on alcoholic beverages
The government proposes two main tax increases on alcoholic beverages:
- Specific tax per liter of alcohol: The specific tax is set to rise to RD$840 per liter of absolute alcohol, adjusted quarterly based on the consumer price index (CPI). This measure will affect the price of alcoholic drinks with higher alcohol content. Previously, the tax was RD$724.12 per liter.
- Increase in the ad valorem rate: The government plans to raise the ad valorem tax rate on alcoholic beverages from 10% to 11%, which will increase tax contributions from producers and importers.
Expected impact and objectives of the reform
These measures aim not only to boost tax revenue but also to target non-essential and health harming products such as alcoholic and sugary drinks, which are not part of the basic family basket.
Of all the pro-health taxes now in common use, alcohol taxation has the most untapped potential.”
Action for health taxes from policy development to implementation: making the case for alcohol taxes. Geneva: World Health Organization and the United Nations Development Programme, 2024. Licence: CC BY-NC-SA 3.0 IGO.
The reform is part of a broader government strategy to modernize the tax system and ensure a fairer distribution of the tax burden across various sectors of the Dominican economy. The proposal will be submitted to the National Congress on October 8 for debate and potential approval.
Public support and alcohol industry opposition
The Dominican government’s proposal to raise alcohol taxes as part of the Fiscal Modernization Bill, has sparked widespread support among the citizens, as per De Ultimo Minuto reporting. Many people have expressed support for the measure, believing it could curb alcohol harm. For example, José Luis Cedeño, a Villa Juana resident who exports tires, said:
I think it’s good to raise the price of rum. We drink too much here, and people don’t want to work. Now, if you want to drink [alcohol], you’ll have to work.”
José Luis Cedeño, Villa Juana resident, Dominican Republic
In contrast to the majority of the people, alcohol industry lobbyists have come out in opposition of the alcohol tax increase, according to media reports. They are afraid the alcohol tax increase would diminish alcohol sales and profits, ignoring the benefits the health of the Dominican people.
WHO, UNDP, UN System call on countries to prioritize alcohol taxation
Movendi International is working to support governments around the world in public health initiatives to raise alcohol taxes and advance other alcohol policy solutions. As part of this work, Movendi International is providing more than 600 resource articles about alcohol taxation best practices, latest evidence, and country examples.
In late 2023, the World Health Organization (WHO) unveiled fresh data underscoring the globally prevalent inadequacy of alcohol taxation. The report revealed a widespread deficiency in employing taxes as a means to reduce alcohol harm and promote health. The WHO also issued a technical manual specifically addressing alcohol tax policy and administration, aiming to provide essential support for countries in this domain. The report advocates for the implementation of excise taxes across all categories of alcoholic beverages.
In September 2024, the Task Force on Fiscal Policy for Health released its latest report “Health Taxes: A Compelling Policy for the Crises of Today.” The report illustrates the significant potential of raising pro-health taxes, including alcohol taxes, for saving lives and raising revenue to invest in programs and services for people.
Of all the pro-health taxes now in common use, alcohol taxation has the most untapped potential: despite being used as a fiscal tool for centuries and being implemented in over 86% of countries worldwide, alcohol taxes have yet to be utilized to achieve their fullest impact for population health, revenue generation and economic growth.
Studies show benefits of and popular support for raising alcohol taxes
A landmark study from 2023 identified 30 cost-effective interventions to achieve the Sustainable Development Goals (SDGs) in the fastest way possible. Among these interventions, alcohol policy and alcohol taxation have been ranked as the second and third most effective intersectoral policies. Implementing these measures could prevent 150,000 deaths caused by alcohol in the next ten years. For every dollar spent, a country could get back $76 worth of good things happening in society, while alcohol taxation alone can generate benefits worth $53 for every dollar spent.
And an analysis published in late 2023 illustrated the evidence for and benefits of raising alcohol taxes. The study presents evidence on the effectiveness of alcohol taxation in raising prices and reducing consumption. And it shows how raising alcohol taxes disproportionately benefits poorer households considering health benefits and indirect financial effects.
In 2021-22, the global polling company Gallup conducted an international representative survey of people’s perceptions of noncommunicable diseases (NCDs) and their risk factors, including alcohol. The poll covered a variety of issues including levels of public support for selected policy measures – such as alcohol taxation.
The survey showed strong and broad support for alcohol tax increases among the world’s adult population.
In this way, the global survey confirms what media reported about Dominican Republic realities: the majority of the people see the benefits of raising alcohol taxes and support the government’s plans.