Puerto Rico senator: Tax reform that’s immune to presidential whims needed
Urges higher, permanent tax on multinationals’ net income
SAN JUAN — Puerto Rican Independence Party Sen. Juan Dalmau stressed Tuesday that the best way to deal with the possibility that the federal government will impose a transition plan that ultimately eliminates the ability of controlled foreign corporations (CFCs) to receive federal credit for the Act 154 excise tax is by passing comprehensive tax reform.
The lawmaker assured that the breadth of that reform must structure the taxation of multinationals based on net profits, that is permanent, of at least 10%, and that is under the control of Puerto Ricans, not subject to the whims or interests of whichever U.S. president or administration is in power, he said.
Dalmau’s remarks come after U.S. Treasury Secretary Stephen Mnuchin asked Gov. Wanda Vázquez to present a transition plan for the federal credit given against the excise tax paid by stateside companies on the island.
“That allows us to collect more revenue. That way, we do not have to rely on an ephemeral and vulnerable special treatment based on the 4 percent of the special [excise] tax,” said Dalmau, adding that “the counter-argument of breach of contract related to exemption decrees does not hold up in a ruined country. Extraordinary conditions allow that harm. We are now threatened since the federal Treasury countdown began to eliminate the 4 percent credit for the tax on foreign [corporations]. That income represents 20 percent of the General Fund.”
For Dalmau, a comprehensive tax reform, particularly in the corporate sector, that eliminates the distinction between exempt and non-exempt companies, and a fiscal policy that modestly increases the tax liability of foreign corporations, is urgently needed and will allow the government to obtain revenue it currently lacks to make social investments in healthcare, mass transportation, the environment, education and culture that elevate the quality of life of Puerto Ricans.
“If we had imposed the tax rates that those companies should have, inn fairness, paid in Puerto Rico, collections in the past 30 years would have exceeded $50 billion: Enough for the working middle class to have been enjoying tax justice for a long time; the government would not have the fiscal crisis it currently suffers; the imposition of an IVU wouldn’t be necessary; the UPR [University of Puerto Rico] would not have budgetary problems; and tens of thousands of workers would not have lost rights or benefits or have to be laid off,” he said.
Dalmau reiterated his call for the Legislature to pass the related measures he has introduced.
“Only in this way can the fiscal deficit be adequately addressed and, in the future, guarantee a more stable and prosperous economic and fiscal framework that will do justice to the majority of our people,” the senator stressed.