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