Puerto Rico resident commissioner acknowledges differences with gov over US tax reform
SAN JUAN – Resident Commissioner Jenniffer González acknowledged that not only are there differences between her and Gov. Ricardo Rosselló regarding amendments they feel should be made to the congressionally proposed tax plans, but she also does not see the political atmosphere needed for companies in Puerto Rico to receive similar tax incentives to those offered in its time by section 936 of the U.S. tax code.
Although the commissioner is opposed to U.S. corporations in Puerto Rico paying a 20% tax on their imports to the U.S. mainland, as set forth in the bill approved Friday in the U.S. House, Caribbean Business learned she does not want to see any preferential treatment for them either.
The governor, for example, seeks that companies in Puerto Rico be exempt from paying a “tollgate tax,” as proposed by the House bill, if they keep their business in Puerto Rico and reinvest in the island. He also suggests that the earnings of foreign corporations in Puerto Rico from certain manufacturing activities of goods on the island that are sold stateside, be subject to a 50% exclusion and that local taxes on them have a credit.
“It’s not a matter of the governor wanting us to be domestic. I want us to be domestic, too. The important thing is that anything that looks like [section] 936 doesn’t have a chance in the federal House,” the commissioner explained in reference to Puerto Rico being considered a foreign jurisdiction for tax purposes.
González said the easiest thing is for all companies to become domestic because they could benefit from everything the administration of President Trump is proposing, which includes lowering the corporate tax rate from 35% to 20%.
The House-approved bill would impose a 20% tax on sales of foreign corporations such as those in Puerto Rico. In its version of reform, the Senate proposes a 12.5% rate for a parent company when it uses intangible assets–patents, brand or technology–at a subsidiary that operates as a foreign corporation.
González said U.S. tax reform is in its first stage. The House approved its version Thursday and the Senate will consider its own. The measure will be amended in a conference committee, where the differences of both chambers will be harmonized and include additional initiatives.
“That includes Puerto Rico, includes measures by the speaker [Paul Ryan], includes measures by the Senate and includes measures by the president,” Gonzalez said.
The resident commissioner assured that Ryan gave her room to work with Ways and Means Committee Chairman Kevin Brady (R-Texas) on initiatives for the economic development of Puerto Rico.
Regarding the comments by Rep. Rob Bishop (R-Utah) regarding potential misuse of funds in Puerto Rico, González said the congressman wants better communication between the government and the fiscal board, as well as greater controls.
She also said that besides the White House’s $44 billion aid request to Congress, which includes disaster funds from which Puerto Rico will benefit, there will be another request for the island in December, “but there will be [strict] transparency requirements.”
Reacts to power utility chief’s resignation
The resident commissioner said she was pleased with the news of Ricardo Ramos’s resignation as director of the Puerto Rico Electric Power Authority amid public scrutiny of the perceived slow pace at which the public utility is being able to restore service after Hurricane María and for defending the $300 million contract with Whitefish Energy Holdings and the capabilities of the small Montana-based company.
Ramos is also involved in controversy that has arisen over a $100,000 contract with a lawyer related to the corruption case against former Sen. Jorge de Castro Font.
“I think there are enough issues. The people of Puerto Rico need to have the electrical system connected and there can be no room for any distractions,” she said.