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Puerto Rico Retailers Assoc. warns of consequences if tax on inventory isn’t repealed

By on February 1, 2019

SAN JUAN – The president of the Puerto Rico Retailers Association, Iván Báez, said its members will be forced to shrink their investments if an alternative to substitute the tax on inventories is not found.

The tax is currently levied on all merchandise stored on the island, which the Municipal Revenue Collections Center (CRIM by its Spanish acronym) then distributes to the island’s 78 municipalities. It is precisely the mayors that have sounded the alarm when denouncing that the tax’s repeal would have a substantial impact on their budgets, warning of losses totaling $400 million a year.

This has created a tug of war between the business sector and the mayors, with the latter not showing up at a meeting convened this week by the private sector to find solutions to the tax.

During the emergency period in the aftermath of the hurricanes that struck the island in September 2017, the impact of the tax was evident, especially in the smaller municipalities on an island, where about 85 percent of the products consumed are imported. The business sector continues to reiterate that it is unable to keep sufficient inventory because of the tax imposed on the merchandise.

In an interview with Caribbean Business, Báez said his organization has proposed alternatives to the tax, including having the private sector reappraise property, which would raise municipal revenue as much of the real estate on the island has not been appraised in decades.

Báez said the private sector has also proposed that the municipal excise tax be raised to compensate for the elimination of the inventory tax. At the island’s capitol, lawmakers proposed putting a cap on the inventory tax, an option that is not accepted by the private sector.

“If we don’t find a solution, retailers will have to evaluate their investments in Puerto Rico or move their businesses to cities that opt to repeal the inventory tax,” Báez said. However, he did not know yet which municipalities support repeal of the tax.

The feud between the mayors and the private sector hit a high point Thursday when neither Cataño Mayor Félix Delgado nor Bayamón Mayor Ramón Luis Rivera attended a meeting convened by the different business groups, which include the Puerto Rico Chamber of Food Marketing, Industry & Distribution, known as MIDA for its Spanish acronym.

“That was highly disrespectful. We are the ones who paid their salaries with their taxes and they did not even bother to meet with us,” Báez said.

He said that while some lawmakers have been sensitive to the plight of the private sector, their hands are tied. House Treasury Committee Chairman Antonio Soto said Thursday that he is waiting for data from the Treasury Department to continue to evaluate options.

Báez noted that numerous retailers have closed over the past two years amid an economic crisis and competition from online retailers, which do not pay the taxes to operate in Puerto Rico.

“The mayors must bring alternatives. They have to tell us what they want,” he stressed.

Repeal of Puerto Rico Inventory Tax Hinges on Municipal Solution

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