Monday, May 29, 2017

Senate evaluating minimum-jobs requisite in Export Services Act

By on March 20, 2017

SAN JUAN – The Office of Management & Budget (OMB), the Treasury Department, the Economic Development & Commerce Department (DDEC by its Spanish acronym), and the Puerto Rico Tourism Co. (PRTC) favored Monday the approval of Senate Bill 368, which amends the Export Services Act (Act 20 of 2012) to include telemedicine and medical tourism services within its incentives.

The bill, presented by the executive branch, also proposes to eliminate the requirement of having five jobs to qualify for this tax incentive act—although it protects employees hired under this decree—as well as the annual reports companies and individuals must present regarding their compliance.

The number of decrees granted under Act 20 is unclear as the PRTC said there have ben 470, OMB said there were 360 until November 2015, while Treasury pegs the number at 607 as of March. This legislation’s impact on the local economy is also unknown, but according to a 2015 Estudios Técnicos report mentioned in the hearing, the number of direct jobs created under the Export Services Act is 3,350.

Representing the Treasury Department, Carmen Guillén said the agency doesn't know what impacts these amendments would have, since they lack an estimate of how many people could benefit from the inclusion of telemedicine and medical tourism services. (Cindy Burgos/CB)

Carmen Guillén said the Treasury Department doesn’t know what impact these amendments would have because it doesn’t have an estimate of how many people could benefit from the inclusion of telemedicine and medical tourism services. (Cindy Burgos/CB)

Representing Treasury, Carmen Guillén said during the Senate’s Social & Economic Revitalization Committee’s public hearing that the agency “can’t identify” the impact this measure would have on the amount of decrees and its effect on Treasury because “we don’t know how many people would benefit” from them once turned into law.

“Regardless, we believe the bill has the potential to allow for the economic development, with its positive effect on our economy, of these services that don’t currently exist on the island,” said Guillén, who suggested amending the bill to define medical tourism and telemedicine to ensure the bill’s goals are complied with.

Moreover, OMB representative Facundo Di Mauro said the bill is in tune with the public policy outlined in the administration’s Plan for Puerto Rico and doesn’t touch upon budget allocations or the use of public funds. It also doesn’t have an impact on management or the DDEC’s programmatic and organizational structures.

For her part, PRTC interim Director Laura Femenías assured believes the bill would have “a positive effect on tourism as it opens doors for investment in the healthcare area,” and expects an increase in patients that travel to the island to request medical services, as well as the number of doctors who offer services abroad.

Even though Femenías said Puerto Rico offers medical services at “very competitive” prices when compared with the U.S., she didn’t present specific numbers in this regard.

Likewise, DDEC Secretary Manuel Laboy endorsed the bill, saying it could have the effect of “transforming the export of services into a real engine for our economy.”

He said that including medical tourism in Act 20-2012 will provide another reason for medical professionals to stay on the island. As for eliminating the five-job minimum requisite, he argued it is necessary to amend an “erred public policy” that has impeded the development of exports, adding that eliminating the need to present annual reports removes a “bureaucratic requisite.”

The Export Services Act offers a 4% corporate tax rate to eligible businesses, which is reduced to 1% in some cases, as would the number of jobs created.

In 2015, the law was amended to include a minimum of jobs created because of criticism against the legislation and limited information on its benefits to the island.

In a 2014 DDEC report on the law’s benefits, it was revealed that only 31% of beneficiaries presented the corresponding annual report, which represented 26 companies and 47 jobs created. Only 26% provided a report on assets, liabilities and net capital. With this information, it was concluded that the companies that presented data totaled $85.53 billion in assets, and $39.56 billion in net capital, but only invested $883,619in Puerto Rico

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