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Amid Crisis, Puerto Rico Cracks Down on Theft, Tax Cheats

By on February 20, 2016

SAN JUAN – Like many small business owners in Puerto Rico, Luis Escribano was having a hard time paying the power bills. So, for at least five years, he did what many others have done: tampered with the electricity meter at his small cafe, illegally cutting his bill by tens of thousands of dollars.

Then the Puerto Rico Electric Power Authority, which is struggling to pay its own bills, decided to make an example of him. He was charged with theft and threatened with jail time if he didn’t pay $40,000 in back bills and fines. The company not only persuaded the court to make restitution a condition of probation for the first time, but also alerted local media that Escribano was due in court last month to publicly shame him.

“They have declared total war,” said Michael Corona, a lawyer who represents Escribano.

While his case is extreme, it reflects a new approach by Puerto Rican public agencies that are desperate for money and no longer able to put up with theft and cheating that went unpunished in the past.

The Puerto Rico government is teetering on the brink of financial collapse, burdened by $72 billion in public debt. Public agencies account for nearly 40 percent of that debt, including the power company, which recently reached a deal to restructure a portion of its $9 billion debt. The highway and transportation authority carries more than $7 billion of that debt while the water and sewer company have more than $5 billion.

Amid the crisis, the Treasury Department is going after delinquent taxpayers like never before, even closing a business owned by the head of the Chamber of Commerce for non-payment of sales tax and temporarily shutting down José Enrique, a restaurant that had become a renowned culinary destination.

The island’s water utility has prevailed on the Justice Department to file criminal charges against people who have not paid their bills or have stolen service, a step only taken in drastic cases in the past. And a government agency that issues permits recently trumpeted the fact that it imposed a $34,000 fine against a company operating an electronic billboard without its permission.

Such actions have surprised many on the island, where the government had often taken a laissez-faire approach to enforcement, among the qualities that made Puerto Rico more like a Latin American country and less like a U.S. state.

“Everything used to be negotiable,” said Treasury Secretary Juan Zaragoza, who is leading an effort to collect overdue tax revenue.

That lax attitude thrived as Puerto Rico went through a period of relative prosperity thanks to a U.S. tax system that fostered the development of manufacturing on the island, mostly pharmaceuticals and medical equipment. But the incentives were phased out by 2006, and the economy began to slump. Unemployment rose higher than that of any U.S. state. Governor after governor borrowed money to help cover the growing deficit, tripling Puerto Rico’s debt in just 15 years.

The new crackdown on unpaid bills is praised by many who say they follow the law.

“It’s about time,” said Hiram Colón, a 47-year-old event organizer. “They should have taken these measures a long time ago because we wouldn’t be in the crisis we find ourselves now.”

But other Puerto Ricans believe the government is unfairly targeting the working class while making few improvements in how it operates.

“Now they’re giving us bad service coupled with the threat of jail,” said Corona, who said that Escribano himself had declined to be interviewed. “I don’t know where this is going to end.”

In this Feb. 4, 2016 photo, a worker from the Energy Theft Control Unit with Puerto Rico's Electric Power Authority holds an electric meter with busted glass during an inspection in Carolina, Puerto Rico.  (AP Photo/Carlos Giusti)

In this Feb. 4, 2016 photo, a worker from the Energy Theft Control Unit with Puerto Rico’s Electric Power Authority holds an electric meter with busted glass during an inspection in Carolina, Puerto Rico. (AP Photo/Carlos Giusti)

Delinquent power bills have been piling up for years and are one of the reasons cited by the electrical utility for its financial woes. It recently announced that it will cut subsidized power at public housing units starting next month because of $31 million in outstanding bills.

Many impoverished Puerto Ricans say the crackdown is making life even more miserable for them. “It’s not right that they are targeting Puerto Rico’s working class,” Wilma Rivera, a 46-year-old mother of three, said as she watched power company workers inspect her meter for evidence of tampering. “We’re the ones paying for everyone else’s mess.”

Despite the grumbling, the government has pledged to pursue those who have long gotten away with breaking the law.

Zaragoza, the treasury secretary, says a lot of other people are fed up with widespread cheating. He says he’s even had people praise him while he walks down the streets of the capital.

“That’s proof that this island has touched bottom, when suddenly a tax collector is a hero,” he said.

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