Puerto Rico Rejects Tax Proposal

May 1, 2015 Taxation in Peurto Rico

SAN JUAN – Puerto Rico is facing doubt over its upcoming debt issuances , as the government rejects calls to reform taxes.

On April 30th the House of Representatives of Puerto Rico voted 28 to 22 to reject a proposed round of tax changes aimed at helping the country attract foreign investment and to fix the current budget deficit.

Under the details of the proposal, the current 7 percent sales tax would have been replaced with a value added tax levied at 16 percent.

Legislators also rejected alternative measures such a replacing the 7 percent sales tax with a sales tax levied at 1 percent alongside a value added tax set at 13 percent.

Shortly following the rejection of the proposal the Governor of Puerto Rico Alejandro Garcia Padilla held a televised national address in which he said that that new steps will now be taken to reform the Treasury Department in order to help cut down tax evasion and reduce government spending.

Puerto Rico is currently facing significant budget deficits, which are, in turn, jeopardizing the country’s push to issue more bonds.

Some experts have specifically stated that in order to help right the current woeful financial situation the government needs to address its deficits in order to increase the attractiveness of its debt issuances.

Photo By: Alex Barth