What makes tax holidays important and what impact do they have on the economy?



Throughout the Dominican Republic there are several unique places with companies that produce everything from medical equipment to jewelry and are tax exempt.

London – These are free zones and industrial parks with more lenient fiscal and customs rules than in the rest of the Caribbean, and through which two-thirds of Dominican exports currently flow.

These areas have also become a source of employment for this nation of 11 million inhabitants, with 198,000 direct jobs generated until the end of last year, according to figures from the Association of Free Zones of the Americas (AZFA).

They play an essential role in the economy of the country, which holds presidential elections this Sunday.

However, these unique places have received criticism from the World Bank.

“They have diversified.”

The free zones had become a kind of long-term policy that the Dominican Republic had had to attract investments since 1969 when the first one was opened in La Romana.

Over time, other free zones emerged in the Dominican Republic.

Aerial view of buildings in a free zone in the Dominican Republic
There are 87 free zone parks in the Dominican Republic and hundreds of companies produce mainly for the US market.

Currently, some 820 local and foreign companies in Dominican free zones moved Exports of more than US$8 billion in 2023According to official figures, a record figure for the country.

This industrial range added thousands of jobs in the Dominican free zones, according to its defenders.

“Limited”

However, there have also been suggestions to modify this policy in the Dominican Republic.

The World Bank said in an August paper that while activity in the special economic zones has boosted employment and attracted foreign direct investment to the country, “its spillover effects on the rest of the economy have been limited.”

The Dominican president, Luis Abinader, speaks next to the flag of his country
Dominican President Luis Abinader comfortably leads the polls ahead of Sunday's elections.

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