Espacios Abiertos intervenes in favor of Gov’t Revealing Tax Decree Beneficiaries
SAN JUAN — Nonprofit government watchdog Espacios Abiertos (EA) went to court as an intervening party in support of the position of the Puerto Rico Economic Development and Commerce Department (DDEC by its Spanish initials) to publish the list of beneficiaries of decrees under acts 20 and 22, a move challenged in a lawsuit by Puerto Rico Privacy Association Inc. (PRPA), which alleges that that action violates the privacy of its members, a group of unidentified investors.
The Justice Department, which represents the defendants—the DDEC and the Treasury Department—indicated during the hearing held Tuesday afternoon by Judge Anthony Cuevas Ramos, of the Court of San Juan, that the publication of the information related to the granted tax decrees is made in accordance with the mandate of Act 60 of 2019 (known as the new Incentive Code of Puerto Rico). He emphasized that contrary to what the plaintiffs argue, the information that is published is not confidential, personal or financial.
For their part, three lawyers from the Block Legal law firm, which represents PRPA, presented their opposition to the dismissal, insisting that publishing the information violates the privacy of those who receive the decrees and undermines their contractual relationship with the government.
EA questioned the legitimacy of the association that filed the lawsuit, while at the same time concurring with the arguments presented by the DDEC favoring the dismissal.
“Since 2017, EA has advocated for the disclosure in Puerto Rico of information related to tax concessions, as is done in the United States and in many other countries in the world since the 1970s,” said EA Executive Director Cecille Blondet.
“Our people must have access to know the use that is given to each penny of public money, that includes knowing who receives it,” stressed. “This applies in the same way to tax privileges. The money that stops from entering the treasury for these concessions is also a public expense, for which both the government and those who receive these concessions have to be held accountable.”
“Without clear and precise information, we cannot evaluate the return on investment of these concessions and verify whether the desired social benefit has been achieved. In times of crisis, when austerity measures are imposed and services to the population are cut, the country cannot remain blind regarding fiscal and budgetary issues. Every dollar counts and knowing is our right,” she added.
Fiscal or tax expenses are all tax exclusions, deductions, exemptions and credits, among others, that the government gives to different types of taxpayers: individuals, companies, industries and non-profit institutions. Generally, these concessions are authorized by law to foster economic activity or achieve a social impact.
“Tax concessions are classified as a government expenditure made under the tax code, and like all government public spending, such information must be available to the public,” reads the release issued by EA.
“The disclosure made by the Treasury and the DDEC is a recent and historical one. A step forward towards greater transparency, something that must be recognized and protected,” said Blondet. At the same time, she pointed out that there are platforms such as the Subsidy-tracker at Good Jobs First that make the information disclosed by the different U.S. jurisdictions accessible.
“In Puerto Rico, fiscal expenses were an invisible expense, a hidden budget until 2019,” EA said, recalling that it fought in court for the publication of a Fiscal Expenses Report.
For its part, the Financial Oversight and Management Board also supported the preparation of the report. EA pointed out that in September 2019 Treasury published for the first time the Tax Expenditures Report, adding that it “revealed that in Puerto Rico these ‘expenses’ total more than $20 billion annually. This figure constitutes 20.4% of the gross domestic product or 30.3% of the Gross National Product and twice the annual general budget of the government of Puerto Rico.”
Since January, the DDEC began to publish information related to several of the laws that grant credits or exemptions. More than 70 laws authorize several government departments and other municipal instrumentalities to grant and regulate tax concessions.