Thursday, December 14, 2017

Puerto Rico CPA Society says proposed US tax code amendments don’t resemble section 936

By on November 22, 2017

SAN JUAN – The president of the Certified Public Accountants Society of Puerto Rico, Ramón Ponte, said Wednesday that the commonwealth government’s proposed amendments to the federal tax reform legislation, which the organization endorses, do not resemble the former section 936 tax credits local U.S. subsidiaries enjoyed in the past.

Some local sectors and politicians are likening the Puerto Rico governor’s proposals to section 936 which are only possible under the current commonwealth status.

In center, the president of the Certified Public Accountants Society of Puerto Rico, Ramón Ponte (Juan J. Rodríguez/CB)

“That’s political rhetoric. Section 936 gave tax credits to U.S. companies here. What we want is to give advantages to foreign controlled corporations here and for us not to be put at the same level as a foreign country,” Ponte told Caribbean Business.

Last week, Resident Commissioner Jenniffer González said Congress was in no mood to approve anything resembling section 936 incentives, which were phased out in the 1990s by the administration of former President Bill Clinton.

Puerto Rico resident commissioner acknowledges differences with gov over US tax reform

The society, the government and the private sector want foreign controlled corporations on the island to be exempt from a proposed 20% tax on imports because Puerto Rico is a U.S. territory. He said if Puerto Rico were exempt from the tax, it would have a competitive advantage over other countries such as Singapore.

Gov. Ricardo Rosselló also seeks to have the island be exempt from paying the preferential rate for the repatriation of capital, which would be available for eight years, as long as manufacturing companies remain on the island during the period in which the rate is available and invest at least 50% of the amount that would be subject to repatriation.

Ponte also said the government’s proposal is consistent with the amendments proposed by congresswoman González, although the resident commissioner herself told Caribbean Business that they were different.

González advocates for tax credits that reward manufacturers for the wages paid to their employees and for the capital investment that results in the creation of direct jobs, as well as indirect jobs, such as jobs created in the construction industry and in the hiring of professional services.

“She proposes benefits for the domestic companies that come here. It is in harmony with what we are proposing,” Ponte said.

Government sources had told Caribbean Business that González was at odds with the governor’s proposal.

CPA Society urges Puerto Rico board to be cautious in reviewing fiscal plans

The Society wrote to the Fiscal Oversight and Management Board, urging it to be careful with the economic projections it uses for the revision of the island’s fiscal plans because of the fragility of the economy and the possible impact of a new U.S. tax code.

Tax reform is expected to impact foreign corporations, which represent 25% of Puerto Rico’s gross domestic product, and would impact the local government’s  economic incentive strategies. The fiscal board expects to review those plans by year’s end.

According to the CPA Society, it is very difficult to predict the short-, medium- and long-term effects of the damage caused by hurricanes to the already battered economy.

image_print
  • rtryon

    It is hard to grasp, but simple to understand: The U.S. Congress is driven by voters, not non-voters. P.R. is one of several owned territories of Congress that suffer for lack of paying taxes and voting. The Statehood party founder Luis Ferré understood this and in the most recent times, the party has finally put forth its island referendum results in favor of Statehood for Congress to consider. The proposers could not have picked a worse time to do it! The voters now in control of Congress, have great concern about national debt, so accepting a new state with more debt than any new state ever had when accepted is shall we say, not an inviting idea.

    Worse, the asking party represents an idea somewhat foreign to mainland thinking because Democrats, while guilty of more historic so-called racial discrimination are thinking that somehow PR would add to their party strength -its in great need of it now, to their surprise- Republicans approach in a negative way, more from concern among its ‘swamp followers’ that can’t imagine leaving the historic way of doing business in which case, PR brings forth mostly a negative view of GOP ideas.

    So, while a genuine American desire to help all in distress has already produced quick multi-billions of aid to hurricane relief, it doesn’t follow that it wants to fund a new state that is unable to look like it can manage more than corruption. My conclusion is: PR best mark-time until the lights go back on with huge help from the mainland, and until the migration of massive consequence is mitigated by the fact that perhaps a majority of all such cases with mouths that can eat better on relief in a state than in PR, have moved; then ask for a friendly divorce with alimony from the U.S. making a Free, Associated State of PR be possible!

    It may seem like a backwards economic choice, but it may set PR free to support itself as it did before the Spanish Conquistadores killed most of the Tainos that lived in peace for a long time without foreign help or domination. However, it is very possible for PR now to survive, with a smaller population and new kinds of energy and capacity to prosper in a way with more per capita than found today among the 40% that live in a barter world without tax. With some federal benefit, that alimony can replace until PR can entice a new industry appealing to retirees that an live for less cost per day than tourists pay for ship tours. These, who stay 4-5 hrs to sightsee in Old San Juan and buy trinkets that allow officials to brag about a growing success that means little to most residents of PR.

    PR must learn to feed itself as it did in Taino times, but much better with modern technology that is not demanding lots of costly energy and water. It is available now. It must also shed costly entitlements and encourage those who need them to depart for FL. It must replace a corrupt public school system with local private ones that can win alimony grants for parents to spend only for educational programs, including on-line and charter school or home schooling.

    Mainland subsidies for heating are not needed in PR. But low cost sleeping chamber cooling may one day help those living at sea level, with power rates at night being much lower than in daytime. Yes, PR can learn to support a limited, but functioning government, not one full of expensive bureaucratic-constipation!

Start your Free Trial for a limited time!