Businesses Attack House Legislation to Raise Municipal Taxes
SAN JUAN — Adding to the list of many challenges Puerto Rico businesses are facing in these tough times, a House bill that would raise municipal taxes for companies in all 78 municipalities, to help ease the $350 million yearly cuts in money from the general fund, has pitted mayors against the business sector.
House Bill 971 would raise the current business tax for financial businesses to 1.9% from 1.5% and the tax for all businesses to 0.9% from 0.5%. If enacted into law, the new tax would go into effect in July.
An agreement made between New Progressive Party mayors and La Fortaleza in March to find ways to ease the $350 million cut to municipalities, called for a hike in business taxes in exchange for repealing the business-equipment tax. Other alternatives include a reassessment of all property taxes, and charging for trash collection and the use of public facilities. Towns are also planning to implement some dispositions in Act 26, which reduced certain benefits employees receive, such as the annual Christmas bonus.
However, the Puerto Rico Chamber of Commerce (CofC) and other business groups that comprise the Private Sector Coalition are raising the alarm, arguing that the new tax will result in many business closings.
CofC President David Rodríguez noted that municipal taxes raise up to $430 million a year and a hike could bring $100 million more, but at the expense of many local companies.
Although the government has enacted labor reform, a new permitting law and other statutes to help ease the cost of doing business in Puerto Rico, he said the tax hike would go against these efforts and hurt local firms. He said there were other less-onerous alternatives and municipalities have to learn “they can no longer keep up their current lifestyle.”