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Research Paper: Impact of Tax Reform in the Dominican Republic

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I. Introduction

This study aims to investigate the impact of a tax reform in the Dominican Republic on taxpayers’ behavior and revenue collection. The research focuses on analyzing the effects of the reform on invoice requests, VAT returns, and income tax returns.

II. Identification Strategy

The identification strategy used to study the impact of the tax reform involves propensity score matching. This approach helps match control and treatment groups based on their observed characteristics.

Matching for Phase 1 of the Reform

  • The treatment group consists of taxpayers whose first request for invoices after the reform was rejected.

  • Taxpayers in the control group did not get their request for invoices rejected and were selected based on propensity score matching. This ensures that both groups are similar in terms of observable characteristics, such as:

    • Firm size
    • Industry type
    • Location
    • Previous invoice requests

Matching for Phase 2 of the Reform

  • The treatment group includes all taxpayers with outstanding tax arrears whose first request for invoices after January 2019 was rejected.

  • Taxpayers in the control group also had outstanding tax arrears but requested invoices before January 2019 and their request was approved. This matching ensures that both groups have similar characteristics, such as:

    • Amount of tax arrears
    • Firm size
    • Industry type
    • Location

III. Data

This study uses various datasets to analyze the impact of the tax reform, including:

  • Invoice requests: This dataset contains information on taxpayers’ request for invoices, including the date, amount, and status of the request.
  • VAT returns: This dataset includes information on taxpayers’ VAT payments, including the amount paid, payment method, and due date.
  • VAT information returns: This dataset provides details on taxpayers’ VAT-related activities, such as sales, purchases, and credits.
  • Income tax returns: This dataset contains information on taxpayers’ income tax payments, including the amount paid, payment method, and due date.

By analyzing these datasets, this study aims to provide insights into the impact of the tax reform on taxpayers’ behavior and revenue collection in the Dominican Republic.