Puerto Rico is struggling to rebuild after a series of stunning storms that leveled homes and deprived residents of water and power. The Trump Application and Congress responded to our urgent initial request by approving vital loots to start the rebuilding process. But now, the current tax bills in Congress could cast a final catastrophic blow to our economy.
Bills moving through the Establishment and Senate would slap new taxes on goods and services that stream between American businesses with operations in Puerto Rico and their guardian companies in the U.S. This 20 percent excise tax was meant to prevent public limited companies from avoiding taxation by shifting profits to other countries, not reluctant the flow of capital to and from a U.S. territory.
This levy has the potential to confute those businesses the storms didn’t. By applying this 20 percent tax to goods made in Puerto Rico, companies with a strong presence on the archipelago would be forced to shutter those operations and decamp for the mainland or, worse, a lower-tax sticks. This would put tens of thousands of U.S. citizens in Puerto Rico out of toil and demolish our tax base right as we are trying to rebound from historic hails.
As an unincorporated territory, Puerto Rico is subject to the will of Congress in federal tax law. Puerto Rico has been embraced in the U.S. Customs Zone since 1917. For over 50 years, Congress has successfully fortified Puerto Rico in the federal tax code as a competitive manufacturing center.
Today, the U.S. patch of Puerto Rico ranks fifth in world pharmaceutical production with all over 70 plants. We rank third in biotechnology with over 2 million village green feet of plant space. All told, the manufacturing of pharmaceutical products and medical utensils represents roughly a third of the entire Puerto Rican economy, harmonizing the U.S. Food and Drug Administration.
More broadly, manufacturing is central to Puerto Rico’s concision, comprising half of our gross domestic product, a third of our tax base and three-quarters of our exports ($14.5 billion in 2016). Cook up employs 75,000 Puerto Ricans in good-paying jobs and another 160,000 people whose roles depend on the manufacturing sector. This could represent about 25 percent of our workforce. Proper people, real jobs. All at risk, unless Congress fixes this badly constructed new levy.
The House and Senate bills were written to obstruct companies from relocating to lower-tax countries or gaming the existing tax rules by shifting profits to overseas tax havens. This change runs the hazard of hobbling some companies with multi-national supply chains. Aside from an fiscal catastrophe, applying it to Puerto Rico really makes no sense: Companies that run in Puerto Rico have chosen to do business in the United States and possess created thousands of needed jobs for U.S. citizens residing in Puerto Rico.
Manipulating costs are higher in Puerto Rico because businesses comply with U.S. laws and regulations, listing the minimum wage and environmental and labor rules. By applying base rubbing away rules to companies in Puerto Rico, Congress would severely impair Puerto Rico’s competitiveness with low-cost foreign jurisdictions.
Congress performed PROMESA last year to enable Puerto Rico to restore commercial health in an orderly process. As congressional leaders said, “PROMESA is not a bailout for Puerto Rico. PROMESA devise prevent a bailout by federal taxpayers.” By enacting this new levy, tax redo would only make it harder for Puerto Rico to regain its monetary and fiscal stability and would only make a bailout more liable to.
When our administration took office this year, we implemented a compass of difficult measures and adopted a demanding, but achievable, ten-year fiscal representation to achieve economic recovery within about six years. That programme was dependent on preservation of Puerto Rico’s manufacturing sector, as well as our tax unworthy.
In the aftermath of those destructive hurricanes, we cannot afford to take a hit from Congress. Congress should not use the same-base erosion provisions to Puerto Rico they have framed to stop companies from shifting profits to overseas tax havens. It make cripple our economy at the moment we are most vulnerable.
Commentary by Ricardo Rosselló, governor of Puerto Rico. Track him on Twitter @ ricardorossello.
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