SBA kicks off World Trade Month with ‘Go Global’ webinar series

Aimed at new exporters and experienced international businesses

SAN JUAN – As part of World Trade Month, the U.S. Small Business Administration, along with several other federal agencies, will conduct a four-part webinar series, titled “Go Global,” starting May 9. The online program aims to help participants and small businesses gain insights on strategies to improve international sales.

Presenting agencies in the series on Thursdays in May include the SBA, EXIM Bank and the U.S. Department of Commerce. The webinars are free of charge, and no pre-registration is required.

“World Trade Month is no better time for entrepreneurs to learn more about taking their business global by entering new markets. Small business owners should take advantage of this free webinar series sponsored by the SBA that will enable them to find new clients in foreign markets, opening the door to growth and enhanced sales opportunities” said SBA Regional Administrator Steve Bulger, who oversees the agency’s operations in New York, New Jersey, Puerto Rico and the U.S. Virgin Islands.

Click here for more details on the webinar series. Visit https://www.export.gov/How-to-Export  for videos with tips on getting started and links to other resources available to small business exporters and those aspiring to sell products and services abroad.

Go Global Webinar Series – Schedule and descriptions provided by the SBA:

–How do I find new buyers, finance sales, and get paid?

Date: May 9, 2019

Time: 2 p.m. EDT

Description: Learn how SBA and EXIM Bank finance and credit insurance tools can help you unlock business potential in foreign markets. Access to finance and finding buyers are two of the most common challenges to small business exporting. Hear from a small business exporter who has used these programs to grow their business beyond the United States.   

–How do I manage challenges in the global marketplace?

Date: May 16, 2019

Time: 2 p.m. EDT

Description: Whether it’s protecting intellectual property rights, competing for foreign government procurement, or addressing trade barriers, learn about U.S. Department of Commerce programs that can help.  Once a small business starts selling to global customers, there will inevitably be a few bumps in the road. Knowing how to avoid challenges, or if they occur, where to turn for support can save time and money.

–What tools can help me find new markets?

Date: May 23, 2019

Time: 2 p.m. EDT

Description: Discover the power of data for finding foreign market opportunities. Get a hands-on tutorial of data tools that can help businesses that are ready to increase international sales. USA Trade Online, the Global Market Finder Tool, and the ITA Market Diversification Tool are available for anyone to use to identify new markets, evaluate existing markets, and perform other market research.

–How can I identify trade opportunities in international development?

Date: May 30, 2019

Time: 2 p.m. EDT

Description: Small business exporters can truly make the world a better place by doing good. In our final webinar of the series, gain insights into the work of U.S. development agencies. You’ll also hear about trade opportunities that can grow your business while solving the world’s most pressing problems.




Resolving the Great Inventory Tax Debate

Editor’s note: The following report was first published in the Oct. 18-24, 2018, issue of Caribbean Business.

For many years, the government and business organizations have supported the repeal of Puerto Rico’s inventory tax, but the change has never materialized. The latest attempt seems to be on a better track than previous efforts.

The business community argues that lifting this tax will open possibilities for economic growth that go beyond increasing inventories because some prominent commercial and professional organizations argue that there are industries that could be developed, such as establishing Puerto Rico as a storage hub for other countries.

A major hurdle has been the fact that the inventory tax is a key source of revenue for municipalities, so mayors have traditionally been reluctant to eliminate this tax.

The situation had to change. Mayors from the New Progressive (NPP) and Popular Democratic (PDP) parties are on board, as well as Gov. Ricardo Rosselló Nevares, the Legislature and the Financial Oversight & Management Board. Nonetheless, some mayors and members of the business community remain concerned that replacing the inventory tax with a slot machine tax provides insufficient funds.

Future opportunities

Surrounded by representatives from the Chamber of Food, Marketing, Industry & Distribution (MIDA by its Spanish acronym), Chamber of Commerce, Asociación de Comercio al Detal de P.R. (ACDET, or Retailers Association), among other organizations, the representative and House Treasury & Budget Committee chairman, Antonio “Tony” Soto, confirmed plans to repeal the inventory tax and replace it with a new tax formula on slot machines not in casinos.

Soto mentioned that various NPP mayors assured the press during a roundtable discussion that they were on board with the tax changes.

Rolando Ortiz, president of the PDP-affiliated Mayors Association, explained that he spoke with several peers, who said they are in favor of eliminating the yearly inventory tax, especially after Hurricane Maria, because the tax represents a hindrance to Puerto Rico’s recovery, particularly because island conditions reduce the number of ways products can reach the island.

Iván Báez, director of public & government affairs for Walmart and ACDET president, presented a similar argument but added that Puerto Rico businesses’ need to have a robust inventory arises not just from a force majeure event happening in Puerto Rico.

“[Hurricane] Michael will create a disruption to Puerto Rico’s supply chain. A storm doesn’t have to hit us directly for the island to be impacted because if Texas, Florida or an important port that ships to Puerto Rico is hit by a hurricane, the island is left exposed,” Báez said.

He added that some ACDET members have pledged to increase their stock to up to 21, 45 or 60 days if the inventory tax is repealed. Nonetheless, Báez explained that some businesses are buying more inventory but are keeping it in the state of Florida or in the Dominican Republic, where they don’t have to pay an inventory tax.

The ACDET president argued that the elimination of the inventory tax could result in increased business inventories on the island but could even turn Puerto Rico into “the great warehouse of the Caribbean.”

Chamber of Commerce President Kenneth Rivera agreed with the assertion that Puerto Rico could become a storage and distribution hub, especially if the Jones Act and other elements are addressed.

“It is a natural progression for Puerto Rico to become a distribution center for the Caribbean and South America. [On the island,] we have good facilities and people can have confidence that the inventory and operations are still in the United States [when stored in Puerto Rico],” Rivera said.

Rivera also argued that just from internal growth alone, Puerto Rico could see big changes. The prospect of increasing and diversifying business inventories could result in $400 million in additional sales. Although he explained that the ultimate tax revenue these additional sales could bring is more complicated to estimate because items have various sales-tax rates.

The measure to eliminate the inventory tax is expected to be approved before the end of October, along with a new tax code, but will be processed in a different bill. Treasury & Budget Committee Chairman Soto explained that there is no need to present new legislation because they will amend or substitute the text in House Bill 1411, which is about the revenue tax.

A good exchange?

The proposal to eliminate the inventory tax is not new. For example, in 2012, then-Gov. Luis Fortuño had announced he wanted to change the inventory tax to a tax at the point of sale. The ongoing challenge has been to find a good source of revenue for the municipalities, which are the sole recipients of the inventory-tax revenue.

Soto is confident the Legislature has found the answer to replace municipalities’ inventory-tax funding by modifying the tax formula on slot machines not located in casinos.

Slot machines pay either $300 or $3,000, depending on the type of machine, for a registration ticket, but most operators get the $300 registration sticker. The new version, according to Soto, leaves the funding from the $300 registration sticker for Treasury’s Gambling Division. The funds from the $3,000 licenses will go to the Municipal Revenue Collections Center (CRIM by its Spanish acronym). Finally, in the revenue collecting chain, the slot machines will be connected to a government system and a portion of the machines’ gains—after handing out the prizes—will be “divided” between the government and machine operators.

The measure also includes a cap on the number of slot machines on the island and requires background checks on the slot machine operation and businessowner housing the slot machines.

The general idea is to replace the inventory tax with slots tax, but there are discrepancies in revenue projections. Soto explained that CRIM’s original revenue figure was $261 million but the House Treasury Committee’s analysis said this calculation was incorrect because it includes companies with decrees that exempt them from paying the inventory tax. A second calculation reduces the new estimated tax revenue to $219 million. However, even this second figure is still dozens of millions higher than the revenue projections from the slot machines tax, which is projected to be more than $160 million.

Regardless of current slot machine-tax projections, the president of the Mayors Association is concerned the revenue source is too unstable to serve as a viable substitute for the inventory tax.

“The slot machines tax is dramatically affected by economic activity. Gambling, in many cases, is not the priority and any change in that consumption pattern will affect municipal revenue, which needs certain stability because the services citizens request are continuous,” Ortiz said.

Members from various business-sector associations, including Cecilia Colón, president of El Colegio de CPAs de Puerto Rico (Society of CPAs), argued that the elimination of the inventory tax is going to bring economic growth that needs to be considered when assessing whether the slot machines tax will be a sufficient replacement.

“Every additional item that is bought because the inventory tax was eliminated will generate municipal patentes through the sale of that item, which will also generate municipal sales tax that goes directly to the municipalities, and that has to be considered in the formula because it is new revenue for the municipality,” Cólon argued.

Walmart’s Báez explained that retailers are focused on eliminating the inventory tax—not on endorsing or disavowing a particular revenue-replacement measure.

“We have focused on the elimination of the inventory tax and have not delved into how it is it going to be replaced. I think it’s a responsibility of the Legislative powers to look for alternatives, and we as citizens, as taxpayers, will analyze them and endorse them or reject them,” Báez said.

With fiscal control board approval

The reform of the Puerto Rico Tax Code has come with difficulties to get the fiscal control board and government to work out all the details, with the board citing the requirement for taxes and incentives to be “revenue-neutral” as the main source of contention.

This situation led Treasury Secretary Teresita Fuentes to state during her confirmation hearing, “We are in the best disposition to discuss alternatives. Certainly, we have a mandate from the fiscal control board that is requesting that the [tax] reform be neutral. That, obviously, is a straitjacket with which the tax reform was conceived.”

However, the repeal of the inventory tax, which will be completed in a separate bill from the tax code, appears to have the fiscal control board, executive branch and Legislature on the same page.

“We understand the negative effect of the inventory tax on businesses on the island. Such a repeal would require an alternate source of revenue for municipalities,” said Natalie Jaresko, executive director of the fiscal control board, through the board’s press spokesperson.

The board’s position toward eliminating the inventory tax comes as no surprise to its proponents from both the business and government sectors.

“If [the fiscal control board] is committed to activating Puerto Rico’s economy, it needs to support the repeal of the inventory tax. We are asking for it; the private sector is asking for it,” the ACDET president said prior to Jaresko’s statement.

As for the municipalities, the Mayors Association president said, “The reality is that that decision needs to be backed by the fiscal control board. Even though we are not happy it is like that, but we have to recognize that the board needs to back the measure. But I have to highlight that the fiscal control board has repeatedly said that the municipalities are a key piece and fundamental in the recovery process of the country’s economic development.”

This is not to say that the board has yet to take a position on the measure involving the slot machines tax, which is the frontrunner to substitute the revenue for the municipalities. Although the inventory tax has gone directly to the municipalities, the new revenue source needs to be sufficient enough that it doesn’t affect the budget of the Government of Puerto Rico.

“The board will evaluate any proposal from the Government or the Legislature to pay for a possible inventory tax repeal, which would need to be revenue-neutral and not affect commonwealth revenues,” Jaresko added.

When analyzing the final proposal, the House Treasury & Budget Committee chairman argued that the fiscal control board needs to evaluate not only the raw numbers but also “the economic impact and need to give us an economic value related to the elimination of the [inventory] tax.”




Senate confirms billionaire investor as commerce secretary

FILE - In this Nov. 29, 2016, file photo, billionaire investor Wilbur Ross talks with reporters in the lobby of Trump Tower. Unlike his soon-to-be boss, the nominee for Commerce Secretary has agreed to divorce himself from a vast financial empire to comply with federal ethics rules. Wilbur Ross can expect questions about his business dealings at his Senate confirmation hearing Wednesday. . (AP Photo/Evan Vucci, file)

FILE – In this Nov. 29, 2016, file photo, billionaire investor Wilbur Ross talks with reporters in the lobby of Trump Tower. (AP Photo/Evan Vucci, file)

WASHINGTON — The Senate on Monday confirmed billionaire investor Wilbur Ross as commerce secretary as President Donald Trump adds to his economic team.

The vote was 72-27.

Breaking with Republican orthodoxy, Ross said the Trump administration will work quickly to re-do the North American Free Trade Agreement. That’s the massive trade pact with Canada and Mexico that has boosted trade but still stings laid-off workers across the Midwest.

Senators from both political parties were deferential to Ross at his nearly four-hour confirmation hearing, which was much more subdued than the confirmation hearings of other Trump nominees. Former commerce secretaries have praised him, including one who served under former President Barack Obama.

“Mr. Ross will bring decades of business, entrepreneurial and civic experience to this important position,” said Sen. John Thune, R-S.D., chairman of the Commerce Committee. “I believe his extensive management experience in the private sector, and his understanding of the challenges faced by workers and businesses alike, will equip him well for the job of leading the Department of Commerce.”

Sen. Elizabeth Warren of Massachusetts criticized Ross’ business ties to Russia and the way he ran a mortgage lender during the housing crisis.

“Mr. Ross has extensive ties to Russia. He plans to keep making money from his major oil shipping companies while working as Commerce Secretary. He’s made billions off the backs of struggling home owners,” Warren said Monday. “He is practically a cartoon stereotype of a Wall Street fat cat.”

As part of his ethics agreement, Ross is giving up his position at Diamond S. Shipping, but he will retain a stake in the company, which ships petroleum and other products. As part of the agreement, Ross has promised not to take any action as commerce secretary that would benefit any company in which he has a financial interest.

At his confirmation hearing, Ross was not asked about business ties to Russia or his work as a mortgage lender, and he did not address the issues.

Senators did note that Ross is divesting from much of his business empire.

Worth an estimated $2.9 billion, Ross has extensive business ties around the globe. In 2000, he founded WL Ross & Co., a private equity firm. As part of his ethics agreement, Ross will divest from the firm.

So far, the Senate has confirmed 15 out of 22 Trump Cabinet or Cabinet-level picks requiring confirmation. Senators also moved forward Monday on Trump’s nomination of Montana Rep. Ryan Zinke to lead the Interior Department, voting 67-31 to limit debate. A final vote on confirmation could occur on Tuesday or Wednesday.

During the presidential campaign, Trump criticized U.S. trade deals, including NAFTA. Trump’s stance on trade is at odds with many Republicans in Congress, but it endeared him to some voters in the Midwest who believe trade deals cost American jobs.

NAFTA was negotiated and signed by President Bill Clinton, with broad support among Republicans in Congress.

Ross said all free trade agreements should be systematically re-opened every few years to make sure they are working in the best interests of the U.S.

Ross said he is pro-free trade but noted his close relationship with the United Steelworkers union as proof that he will fight to protect American jobs. The union has endorsed him.

The commerce secretary has several roles in promoting American business interests in the U.S. and abroad. The department handles trade issues, working to attract foreign investment to the U.S. The department also oversees agencies that manage fisheries, weather forecasting and the Census Bureau, which will conduct a count in 2020.

Ross said he has experience at that agency; he was a census-taker while he attended business school.




Trump Taps Billionaire Investor Ross for Commerce Secretary

FILE - In this April 17, 2007, file photo, Wilbur Ross Jr., Chairman and CEO of WL Ross & Co., speaks at the NanoBusiness Alliance Conference in New York. Ross, the billionaire investor considered the "king of bankruptcy" for buying beaten-down companies with the potential to deliver profits, is President-elect Donald Trump's choice for Commerce secretary, a senior transition official said Wednesday, Nov. 23, 2016. The official isn't authorized to publicly discuss the matter and requested anonymity.  (AP Photo/Mark Lennihan, File)

In this April 17, 2007, file photo, Wilbur Ross Jr., Chairman and CEO of WL Ross & Co., speaks at the NanoBusiness Alliance Conference in New York. (AP Photo/Mark Lennihan, File)

WASHINGTON — Wilbur Ross, the billionaire investor considered the “king of bankruptcy” for buying beaten-down companies with the potential to deliver profits, is President-elect Donald Trump’s choice for commerce secretary, a senior transition official said.

The official isn’t authorized to publicly discuss the matter and requested anonymity.

Reputed by Forbes to be worth nearly $3 billion, Ross would represent the interests of U.S. businesses domestically and abroad as the head at Commerce. His department would be among those tasked with carrying out the Trump administration’s stated goal of protecting U.S. workers and challenging decades of globalization that largely benefited multinational corporations.

With a Florida home down the road from Trump’s Mar-a-Lago retreat, the 78-year-old Ross played a role in crafting and selling the president-elect’s tax-cut and infrastructure plans. Ross has suggested that much of America is disgruntled because the economy has left middle-class workers behind and says Trump represents a shift to a “less politically correct direction.”

“Part of the reason why I’m supporting Trump is that I think we need a more radical, new approach to government – at least in the U.S. – from what we’ve had before,” Ross told CNBC in June, referring to Trump’s blunt tone and sweeping promises to reinvigorate economic growth.

Despite his embrace of populist rhetoric, Ross has enjoyed a patrician lifestyle. He frequently commutes between his offices in New York and home in Palm Beach, Florida, according to Haute Living magazine. He maintains an art collection worth more than $100 million that includes works by the Belgian surrealist Rene Magritte. A graduate of Yale University, he pledged $10 million to help build its management school.

For 24 years as a banker at Rothschild, Ross developed a lucrative specialty in bankruptcy and corporate restructurings. He founded his own firm, W.L. Ross, in 2000 and earned part of his fortune from investing in troubled factories in the industrial Midwest and in some instances generating profits by limiting worker benefits. That region swung hard for Trump in the election on the promise of more manufacturing jobs from renegotiated trade deals and penalties for factories that outsourced their work abroad.

A specialist in corporate turnarounds, Ross buys distressed or bankrupt companies at steep discounts, then seeks to shave costs and generate profits. Some of those cost reductions have come from altering pay and benefits for workers. Since 2000, his firm has invested in more than 178 companies.

Ross most prominently created four companies through mergers and acquisitions that focused on steel, textiles, autos and coal. In some cases, Ross has sold the companies he packaged to even larger globe-spanning companies. In 2005, he sold the International Steel Group, which included the former Bethlehem Steel, to the Indian steel magnate Lakshmi Mittal.

And while his investments appear to have proved generally lucrative, they have also at times brought troubling publicity.

In early 2006, the Sago coal mine owned by Ross exploded, triggering a collapse that killed a dozen miners. Federal safety inspectors in 2005 had cited the West Virginia mine with 208 violations.

Ross said afterward that he knew about the safety violations but that the mine’s management had assured him that it was a “safe situation.”

“Oh, my God, it’s the worst week of my entire life,” Ross told ABC News days after the collapse.

If confirmed by the Senate as commerce secretary, Ross would oversee nearly 47,000 employees and a budget of roughly $8 billion.

Among its responsibilities, the Cabinet department provides data on the economy through the Census Bureau and monitors the environment through the National Oceanic and Atmospheric Administration.

One former commerce secretary, Donald Evans, noted that a prime responsibility is opening up markets around the world for U.S. companies and workers.

“What you are is ambassador to the world from America,” said Evans, who served under President George W. Bush. “It’s critically important when you go to other countries that, first and foremost, you care about them, the citizens of their country.”

That advice clashes somewhat with the promises made by Trump, who campaigned on the doctrine of putting “America first.” The president-elect told voters that Mexico, China and other countries had played U.S. trade negotiators for fools.

“Under a Trump administration, no American citizen will ever again feel that their needs come second to the citizens of foreign countries,” Trump said in April.




Puerto Rico to Host Most important Convention of the Cruise Industry

 

From left to right: Ingrid Colberg, executive director of Ports Authority, Micky Arison, chairman of Carnival Corporation & PLC and the FCCA, Ingrid I. Rivera Rocafort, executive director of the Puerto Rico Tourism Company, Michelle Paige, president of the FCCA and Orlando Ashford, president of Holland America Line

From left, Ingrid Colberg, executive director of Ports Authority, Micky Arison, chairman of Carnival Corporation & PLC and the FCCA, Ingrid I. Rivera Rocafort, executive director of the Puerto Rico Tourism Company, Michelle Paige, president of the FCCA and Orlando Ashford, president of Holland America Line (Picture provided)

SAN JUAN – Puerto Rico will be hosting this Friday the Florida Caribbean Cruise Association’s (FCCA) 23rd cruise industry convention. The event will be held at the Puerto Rico Convention Center from the 26th to the 30th of September and has already confirmed the attendance of 1,000 delegates.

“This definitely represents a positive impact on hotel occupancy and economic development… generating over 1,800 room nights and approximately $1.3 million in economic impact,” said Ingrid Rivera Rocafort, director of the Puerto Rico Tourism Co. (PRTC) as proof that the cruise industry is booming.

Rivera Rocafort also emphasized that people “will have the opportunity to do business directly with these major cruise lines to supply products to the ships arriving in the island, which is an advantage for local products.”

“Being host of the FCCA reiterates the trust we have regained from the highest executives in the cruise industry, thanks to the efforts the Ports Authority has made, such as expanding the dock 3 for mega cruises and the incentives they have offered during low season to attract new cruises and increase passenger traffic,” the executive director of the Ports Authority, Ingrid Rodríguez Colberg, said in a statement.

The president of the FCCA, Michel Paige, appreciated the efforts Puerto Rico had put in to host the convention.

“They have not spared any effort to attract executives of the cruise lines and participants, allowing everyone to appreciate the offers and improvements that have led to impressive growth of the cruise industry, a trend which we are keen to see continue,” Paige said.

Puerto Rico cruise convention floor

This event will feature forums on topics such as tourism development, ports, safety and other cruise industry related affairs. It also promotes building relations with the public and private sectors, as well as with other countries.

Among the FCCA members are AIDA Cruises, Carnival Cruise Line, Celebrity Cruises, Disney Cruise Lines, Holland America, Norwegian Cruise Line and Royal Caribbean International.




US Retail Sales Slump 0.3 Percent, Ending 4 Months of Gain

In this Thursday, Feb. 19, 2015, file photo, Macy's shoppers leave the retailer's flagship store, in New York (AP Photo/Mark Lennihan, File)

In this Thursday, Feb. 19, 2015, file photo, Macy’s shoppers leave the retailer’s flagship store, in New York (AP Photo/Mark Lennihan, File)

WASHINGTON- U.S. shoppers retreated in August, cutting back their spending at auto dealers, furnishers and building material stores to depress overall retail sales after four straight monthly gains.

The Commerce Department said Thursday that retail sales fell 0.3 percent in August, a tentative sign of caution for American consumers.

Rising incomes and job growth have trickled into consumer spending, supporting economic growth even as a strong dollar and low energy prices have hurt the U.S. industrial sector. Over the first eight months of the year, retail sales rose 2.9 percent compared with the same period in 2015.

“The underlying fundamentals for the consumer remain quite strong,” said Stephen Stanley, chief economist at Amherst Pierpont. “That makes August’s clunker of a report a little hard to explain.”

Stanley noted that the decline in retail sales might reflect some pre-presidential election doldrums and that sales reports in the next few months will be critical to monitor.

Still, consumers clearly appeared to pause in August. Spending on building material and furniture dipped, even though home sales have been solid in recent months. Auto dealers reported declining sales ahead of the new model year. Sales also fell at gas stations, largely reflecting lower oil prices. Even online and catalog sales, a sector that usually posts strong gains, slipped last month.

Not all categories declined. Back-to-school shopping appeared to bolster sales of clothing. And spending at restaurants and grocery stores also improved.

The solid retail spending in prior months had defied anemic economic growth in the first half of 2016. Retail sales seemed to largely track a robust pace of hiring, which similarly went against the slowing pace of overall economic growth.

The unemployment rate remains a healthy 4.9 percent. And monthly job gains have been averaging averaged 232,000 since June, an indication that many employers expect growth to pick up in coming months.

As the job market has healed from the Great Recession, more Americans are finally enjoying solid income gains. The median household income jumped 5.2 percent last year to an inflation-adjusted level of $56,516, the Census Bureau said Tuesday. It was the largest annual increase since 1967, when the government started reporting the data.

Still, the durable but sluggish recovery from the recession means that incomes are still depressed. The median household still earns 1.6 percent less than it did in 2007 before the recession struck.




Wal-Mart Civil Trial Challenging Transfer-Pricing Tax Gets Underway

Walmart

Wal-Mart Civil Trial Challenging Transfer-Pricing Tax Gets Underway

The civil trial in the lawsuit that Wal-Mart Puerto Rico filed against the commonwealth government over the hike in the transfer-pricing tax got underway this week at the federal court in San Juan amid concerns over the divulging of confidential government documents.

“You have to understand that this case cannot be treated in secrecy,” said Judge of the U.S. District Court for the District of Puerto Rico José A. Fusté, during a pretrial conference on Monday, contending his obligation is to maintain a balance. “The press will be here.”

The trial has 11 witnesses including Government Development Bank (GDB) President Melba Acosta and Treasury Secretary Juan Zaragoza, who will be called upon by Wal-Mart.

Fusté said he was going to try to protect the confidentiality of certain documents that the GDB did not want to be made public. The bank is currently in negotiations with creditors in an effort to restructure the island’s $70 billion public debt.

Despite limits on the ability of federal courts to interfere with tax collections, Wal-Mart sued the P.R. Treasury Department, contending that Act 72 of 2015 “unconstitutionally” singles out Wal-Mart for inequitable tax treatment.

Act 72 increases the rate at which tangible corporate property that comes from outside Puerto Rico is taxed, from 2% to 6.5% on entities doing more than $2.75 billion of business on the island.

The retail giant says the tax violates the Commerce Clause of the U.S. Constitution and equal protection laws. The Commerce Clause gives Congress the power “to regulate commerce with foreign nations, and among the several states, and with the Indian tribes.”

Wal-Mart also alleges that the new tax rate will amount to more than 91% of its net income in Puerto Rico. Should the company’s net income fall, says Wal-Mart, the tax may actually exceed this figure.

For its part, the commonwealth government contends that the Butler Act prevents lawsuits that seek to restrain the collection of any tax imposed by the laws of Puerto Rico. In other words, the commonwealth’s position is the way to challenge a tax is to pay it first and then sue to get the money back.

The Butler Act, a close relative of the Tax Injunction Act, provides that “[n]o suit for the purpose of restraining the assessment or collection of any tax imposed by the laws of Puerto Rico shall be maintained in the U.S. District Court for the District of Puerto Rico,” according to an August 2013 decision regarding a case on Colorado’s efforts to collect sales tax by the U.S. Court of Appeals, 10th Circuit.

While legal experts contend Wal-Mart faces jurisprudence that places limits on the ability of federal courts to interfere with state taxes, this case is different because the multinational chain claims that the new law violates the Commerce Clause, as it is being taxed at 6.5% when it buys tangible property outside the commonwealth, but not if Wal-Mart buys the same property in Puerto Rico.

The lawsuit comes as Puerto Rico is amid a crippling debt crisis. The island’s efforts to address the situation have already resulted in a local bankruptcy law that would allow the territory’s utilities to restructure $20 billion in debt being thrown out in court. The U.S. Supreme Court is slated to hear an appeal on the case in March.

Puerto Rican and Obama administration officials have said the territory’s crisis is so severe it could turn into a humanitarian crisis if Puerto Rico can’t restructure its debt.

Meanwhile, Fusté dismissed earlier this month claims by the commonwealth government that Wal-Mart Puerto Rico had used transfer pricing to evade its proper tax burden as utterly irrelevant to whether those laws themselves are justified.

Revenue projections for Puerto Rico could be significantly affected by the transfer-pricing tax legal challenge filed by Wal-Mart.

Puerto Rico officials warned about the negative impact of the litigation as it updated projections for fiscal years 2016 to 2020 to account for year-to-date actual results. In response to creditor requests for additional information, projections were further extended until fiscal 2025.

“General fund inflow assumptions do not account for the potential risk of a material negative impact [$115 million in fiscal 2016] from the ongoing Wal-Mart litigation,” according to a footnote in an update issued Jan. 18 to the Puerto Rico Fiscal & Economic Growth Plan.

Editor Rosario Fajardo contributed to this story.