Dominican Republic's ITBIS Tax Shows Significant Gains, IMF Report Says

SANTO DOMINGO, Dominican Republic – A new report from the International Monetary Fund (IMF) and the Dominican Republic's General Directorate of Internal Taxes (DGII) reveals significant improvements in the performance of the Sales and Services Transfer Tax (ITBIS), showing both increased revenue collection and a sustained reduction in non-compliance.

The joint analysis, titled “ITBIS Tax Gap,” indicates the tax's contribution to the country's Gross Domestic Product (GDP) grew from 4.6% to 5.0% between 2018 and 2023. This upward trend reflects a gradual enhancement in the efficiency of the tax administration's processes.

During the evaluated period, tax non-compliance significantly decreased, falling from 41.6% in 2020 to 36.5% by 2023. This reduction is attributed to strengthened controls and modernization initiatives implemented over recent years.

The report highlights that these positive shifts in ITBIS performance stem directly from efforts to optimize tax management, boost transparency, and foster greater voluntary compliance among taxpayers.

The study utilized the Revenue Administration-Gap Analysis Program (RA-GAP) methodology. This framework quantifies the difference between potential tax collection, assuming full compliance, and the actual revenue observed. The gap accounts for various forms of non-compliance, including evasion, omission, underreporting, and late declarations, offering a precise view of taxpayer behavior and existing shortfalls.

In addition to tax data, the study incorporated national accounts information provided by the Central Bank of the Dominican Republic.

The report identifies sectors with the highest levels of non-compliance, including construction-commerce, hotels-restaurants, and professional services. These areas represent priority targets for focused interventions to further improve compliance.

The DGII previously lacked updated figures on ITBIS tax non-compliance since 2017. Therefore, the publication of this study provides invaluable technical input for the tax administration. It offers solid evidence to guide strategic decisions, optimize auditing efforts, facilitate voluntary compliance, and design more effective policies for sustained ITBIS gap reduction in the medium term.

This study was conducted as part of the IMF's technical assistance program. The program aims to strengthen national capacities in measuring, analyzing, and managing tax compliance within the Dominican Republic.

The complete report is accessible on the DGII's official website, www.dgii.gov.do.