Doninican Business Model

[cobraboy]

Certain sectors of the formal economy do operate under can't pay now, will pay later option. They simply don't pay the rated taxes and pay the penalties later for that (which are about always at reduced costs than most people realize here).

The DGII (IRS) allows this and tries NOT to force those business due to the implications of adding more burden to an already troubled business! The gov wants the business to pay the taxes on time, but if they can't they also want the business to stay open and keep people employed and the economy active.

This is unique to our system and possibly something other countries facing major economic troubles should allow on limited instances! It helps small business owners a lot and it shows!

The purpose of the gov is facilitate trade to grow the economy and regulate it. The purpose of the DGII is to collect taxes so that the gov can operate efficiently and focus on other problems that need attention. If the government allows the DGII to go after the business's neck for failing to pay taxes on time, and kills the business on the way, then the government itself is ruining the economy!

That's the reason why there's a big difference between failing to pay the taxes on time and tax evasion, where you hide assets from the DGII!

Tax evasion is criminally penalized, tax bills that go unpaid get amnesties to come clean and rejoin the tax paying business community anew.

This wouldn't be a problem if the businesses were generating enough revenues. That has been my point.

And tax collectors in the US do the same, even on 940/941 and sales tax delinquencies. They cut businesses slack all the time, to a point. Unless, of course, they catch you using the $$$ for personal gain and not because of lowered revenues.

They won't, however, cut you any slack on the principle. Maybe, maybe a little on the penalties and interest.

They will lower the boom on fraud.

So, once again, you've shed NO light on this mysterious Dominican business model.

(BTW: you admit that tax collection can hurt the Dominican economy. Why, it seems like just yesterday where you waxed at length about the future of tax collection which will cause evasion to just vanish. Again, you want it both ways: the gubmint wants to help businesses with tax issues because aggressive enforcement hurts economic growth, but they will be implementing policies which will force the HUGE tax-free underground economy into the sunlight with aggressive collections.)

[PICHARDO]

This wouldn't be a problem if the businesses were generating enough revenues. That has been my point.

And tax collectors in the US do the same, even on 940/941 and sales tax delinquencies. They cut businesses slack all the time, to a point. Unless, of course, they catch you using the $$$ for personal gain and not because of lowered revenues.

They won't, however, cut you any slack on the principle. Maybe, maybe a little on the penalties and interest.

They will lower the boom on fraud.

So, once again, you've shed NO light on this mysterious Dominican business model.

(BTW: you admit that tax collection can hurt the Dominican economy. Why, it seems like just yesterday where you waxed at length about the future of tax collection which will cause evasion to just vanish. Again, you want it both ways: the gubmint wants to help businesses with tax issues because aggressive enforcement hurts economic growth, but they will be implementing policies which will force the HUGE tax-free underground economy into the sunlight with aggressive collections.)

No Robert! This doesn't happen because the businesses fail to generate enough revenues, but because the tax hike implied by the spike on costs, almost instantly eats well into the cushion on appreciated values some business can only afford to pre-set their goods to. These types of business don't have the same flexibility to cushion their inventory price index due to too much competition (think of three to four Colmados in the same block to follow up on the exampled business I picked upon to illustrate the DR model for you guys here), type of goods or if shelf life makes it impractical to attempt to.

As for tax issues? Nice try, but no. The IRS will not let you off because you claim things are tough and you fail to prove that it afflicts your ability to pay them. They will treat you the same as they do business that fail to pay on time!

If you guys took to learn a bit and didn't instantly apply your foreign first world knowledge on business to discredit on the spot, you would learn a lot about the Dominican business model at the heart of it all.

It's late, I need to eat something and walk a few before hitting the sack...

[cobraboy]

No Robert! This doesn't happen because the businesses fail to generate enough revenues, but because the tax hike implied by the spike on costs, almost instantly eats well into the cushion on appreciated values some business can only afford to pre-set their goods to. These types of business don't have the same flexibility to cushion their inventory price index due to too much competition (think of three to four Colmados in the same block to follow up on the exampled business I picked upon to illustrate the DR model for you guys here), type of goods or if shelf life makes it impractical to attempt to.

Pure 100% baloney.

Taxes are NOT PAID BY A BUSINESS!!! They are COLLECTED BY A BUSINESS!

If a business COLLECTS THE TAX BUT DOESN'T PAY THE STATE it's because the owner CHOSE to divert the funds to himself BECAUSE he didn't have enough revenue or cash capital reserve to cover his expenses!!!!!!!!!!!!!

That comes from LACK OF REVENUE!!!!!!!

If he didn't collect taxes in the first place and is now required to pay them to the state, he DISCOUNTED the product by the % of taxes to the customer; he STILL, by law, collected the taxes! If he didn't pay them and didn't divert the funds to himself

THAT COMES FROM LACK OF SUFFICIENT GROSS MARGIN TO COVER TAXES AND EXPENSES!

Debits and credits, Pichardo. That is what business LIVES on!

As for tax issues? Nice try, but no. The IRS will not let you off because you claim things are tough and you fail to prove that it afflicts your ability to pay them. They will treat you the same as they do business that fail to pay on time!

Dude, please, just STOP IT!!!!! You have NO idea how many businesses I bought because the owner got into tax problems and the doors were STILL open because the state (FL, PA, DE & NJ) cut them some slack because their AUDIT determined the owners did NOT direct $$$ toward themselves instead of paying taxes. Same with the Feds. I did this for both a public corporation as well as my OWN businesses.

It happened to me! My healthcare business exploded and I grew waaaaaay beyond the ability to pay current taxes with a huge pile of receivables collected in 90-150 days! Both FL as well as the Feds cut me a LOT of slack.

But let me make this caveat: if you are delinquent in taxes and it is determined you LIED to the auditors (either verbally or in withheld documents) they may lower the boom...at their discretion.

That is how the US system works.

Sheesh...there isn't one student in a business school that doesn't understand that Uncle Taxman is the creditor of LAST RESORT! Like the IMF!!!

If you guys took to learn a bit and didn't instantly apply your foreign first world knowledge on business to discredit on the spot, you would learn a lot about the Dominican business model at the heart of it all.

It's late, I need to eat something and walk a few before hitting the sack...

More baloney. Why do you keep this up?????

I actually believe you believe your reconbigulating ostalation transfigulator mind technique will convince people that there IS some mysterious "Dominican Business Model" that is DNA-specific...

[Chip]

Based on what I've learned here in graduate school the tax law is fairly vigorous and requires monthly reporting to II. Also, larger businesses or businesses that have lots of suppliers virtually guarantees that an accountant will need to be hired to keep the books in order. The Dominican tax law is structured around standard economics as taught anywhere else in the world.

However, this doesn't mean people aren't able to have two sets of books like in other places.

Back to the topic at hand - the Dominican business model - I would say it is based on generally on a start up with constraint free capital and minimizing costs and overhead to the maximum which generally means finding the cheapest labor and/or goods which sometimes means compromising the service or deliverable product. A smart businessman here who doesn't let a successful business go to his head and blow it on crap is able to save capital by fairly impressive amounts. I personally know of a few cases.

[Barnabe]

Taxes are NOT PAID BY A BUSINESS!!! They are COLLECTED BY A BUSINESS!

True for sales tax (ITBIS). Not for income tax or local taxes.

Barnabé

[the gorgon]

If you have a basic business background, then you'll know that there are two basic principles to run a successful business anywhere in the world: Expenses VS Profits! You want to stick to maximize profits and minimize expenses in order to have a successful business...


The DR business model is the same as the above basic principle, but then, how do you actually achieve that and what model of business allows for that in the Dominican economy?


For that we take to exploring the innards of the most popular and prevalent business of the Dominican Republic and possibly the most revealing of what model is best to work with here: The Colmado (bodega, convenience store, etc...).

Rent don't buy!

It's something that we are accustomed to hear and follow up on when we venture into any small to large business in the developed world. But, is this true for the Dominican Colmado and local business model it represents?

Facts are that Dominican RE is cheap firstly, location is a non-issue as any place is as good as the business it carries secondly and rent is a thorny issue which can see you in the streets, due to rent control modifiers not applying to commercial property in the country.

So, rent and don't buy is not really true or applicable for the Dominican business model, which is strongly suggestive elsewhere in the region and world.

So our Colmado is fully owned for in terms of RE and leasing terms.

Now we set upon the operational part of the business!

A mechanical scale hangs from the ceiling. A counter big enough to partition the client access area to that of the staff and goods. We have several refrigerators, utensils, lavatory, etc...

Then we have the shelves stocked with the goods for sale, inventory. We have the register and the common things you expect in the line of business like these in the country.

But wait! Didn't we just mention inventory?

How does this relates any different to operating a business model back home, just the same, no?

You estimated the costs, shelf life, demand and value of that inventory just as you do in the US bodega model, so what's there to say they are different models of business at all?

Sure the actual property is different by virtue of looks and development. The inventory also reflects the exotic location. The equipment and furnishings also, but all this is expected from different locations and cultures, right?

NOT!

You see in the US model, you can carry on the business basics as usual when it comes to inventory control and allocations, but in the Dominican Republic prices are not stable for long periods in most of the consumables you carry, nor is the price jumps within a margin you can work around with ease to process your next inventory refill.

You see, the soap bars you got for your inventory last week, and sold with a 100% markup for profit, just went up 125% for the next order to stock your now empty shelve. So even when you made a comfortable and nice profit of 125% for the complete inventory sold, your costs for the next order surpasses the costs of the inventory sold atop the profits you made and still need you to come up with an extra % to cover the new stock!

That's not only a frequent cost of doing business in the DR, but the standard operating procedure each week!

So how can a business model you so understand in USA, be so impossible to carry out here in the DR?

Your model starts to crumble just weeks after having invested into your new Colmado and things don't seem to let up on their rise of costs!

But that's not only inventory! Then we have that the energy costs also have risen along the gasoline spent to get your goods at supply points. The water bill went up!

So how can you survive the Dominican Republic economy using a fit model for all this?

Well, we call it the Dominican business model for a reason: It's made for the DR alone!

Above was just one example of the lowest and simplest type of business in the DR...

PICHARDO issues the following


If you have a basic business background, then you'll know that there are two basic principles to run a successful business anywhere in the world: Expenses VS Profits! You want to stick to maximize profits and minimize expenses in order to have a successful business..

i must be a lot older than you are, PICHARDO. the way i learnt it was Expenses vs Revenues. maybe things have changed dramatically since i studied the subject.

[the gorgon]

PICHARDO issues the following


If you have a basic business background, then you'll know that there are two basic principles to run a successful business anywhere in the world: Expenses VS Profits! You want to stick to maximize profits and minimize expenses in order to have a successful business..

i must be a lot older than you are, PICHARDO. the If you have a basic business background, then you'll know that there are two basic principles to run a successful business anywhere in the world: Expenses VS Profits! You want to stick to maximize profits and minimize expenses in order to have a successful business..way i learnt it was Expenses vs Revenues. maybe things have changed dramatically since i studied the subject.

PICHARDO, can that passage of yours be translated into a language that can easliy be recognized by the average mortal?

[bob saunders]

Pure 100% baloney.

Taxes are NOT PAID BY A BUSINESS!!! They are COLLECTED BY A BUSINESS!

If a business COLLECTS THE TAX BUT DOESN'T PAY THE STATE it's because the owner CHOSE to divert the funds to himself BECAUSE he didn't have enough revenue or cash capital reserve to cover his expenses!!!!!!!!!!!!!

That comes from LACK OF REVENUE!!!!!!!

If he didn't collect taxes in the first place and is now required to pay them to the state, he DISCOUNTED the product by the % of taxes to the customer; he STILL, by law, collected the taxes! If he didn't pay them and didn't divert the funds to himself

THAT COMES FROM LACK OF SUFFICIENT GROSS MARGIN TO COVER TAXES AND EXPENSES!

Debits and credits, Pichardo. That is what business LIVES on!

Dude, please, just STOP IT!!!!! You have NO idea how many businesses I bought because the owner got into tax problems and the doors were STILL open because the state (FL, PA, DE & NJ) cut them some slack because their AUDIT determined the owners did NOT direct $$$ toward themselves instead of paying taxes. Same with the Feds. I did this for both a public corporation as well as my OWN businesses.

It happened to me! My healthcare business exploded and I grew waaaaaay beyond the ability to pay current taxes with a huge pile of receivables collected in 90-150 days! Both FL as well as the Feds cut me a LOT of slack.

But let me make this caveat: if you are delinquent in taxes and it is determined you LIED to the auditors (either verbally or in withheld documents) they may lower the boom...at their discretion.

That is how the US system works.

Sheesh...there isn't one student in a business school that doesn't understand that Uncle Taxman is the creditor of LAST RESORT! Like the IMF!!!

More baloney. Why do you keep this up?????

I actually believe you believe your reconbigulating ostalation transfigulator mind technique will convince people that there IS some mysterious "Dominican Business Model" that is DNA-specific...

Yris pre-pays income tax (the school) quarterly based on what they expect her to make. If she makes less she gets a credit and pays less the next year.

[the gorgon]

PICHARDO, what the heck does this mean?

Unlike in your business model, the Dominican business model is pre-active real time and not post-active to trends.

you think that sounds intelligent? you believe that people are going to ooh and aah, and think you are scholarly? it is the biggest pile of horsesh*t i have read , in a long while.how can something be pre active in real time? that is like saying " the future is not what it used to be".

[the gorgon]

PICHARDO, save yourself some time, and effort. you are never going to win an argument over cobraboy when it comes to the matter of business. the guy has forgotten more than you will ever learn.