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Rep. González Calls for Stopping IVA implementation

By on March 21, 2016

SAN JUAN — On Monday, House Minority Leader Jennifer González urged majority Popular Democratic Party lawmakers to stop the implementation of the value-added tax (VAT, or IVA by its Spanish acronym) and instead consider giving way to House Bill 2783, a tax reform bill filed by the New Progressive Party (NPP) delegation.

Back in January, González filed a bill that seeks to halt the implementation of a VAT system, as well as do away with the tax on business-to-business (B-to-B) transactions. The House Treasury Committee, chaired by Rep. Rafael Hernández, failed to recommend its adoption.

Yet, both House Speaker Jaime Perelló and Hernández have recently stated they don’t support the transition to a VAT as originally envisioned, and are now calling to revisit the matter.

“[Perelló and Hernández] have said they don’t support the imposition of a VAT due to its negative effects on the economy, so I urge them to reconsider and approve House Bill 2783, presented by the NPP delegation, so we can put a stop to the VAT,” González said.

As part of the controversial tax reform approved by the Alejandro García Padilla in 2015, the island’s transition to a VAT system and an increase of the B-to-B tax to 10.5% were slated to begin April 1. Following calls from the public and private sectors to at least delay the initial phase of implementation, Treasury Secretary Juan Zaragoza postponed it until June 1, while a second phase is set to begin Aug. 1.

For González, collecting the sales tax across every stage of the supply chain would only make the government’s management and oversight efforts more difficult, while its overall result would be an added burden on the private sector as well as higher costs.

“That cost will be passed on to consumers. The [Puerto Rico] United Retailers Association and economists have already said the inflationary effect of the VAT would increase prices by as much as 28%,” said González, who is also vying for the resident commissionership in this year’s general election. “Puerto Rico would lose competitivity,” she added.

While García Padilla recently requested during his State of the Commonwealth address that the Legislature revisit his original tax reform proposal, which would eliminate income taxes for those earning less than $40,000 a year, lawmakers, including those from his own party, have failed to rally behind the governor’s call for action.

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