CofC draws promise from Fortuño to eliminate commercial property taxes

Written by  //  June 25, 2011  //  General Biz News  //  No comments

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Gov. Luis Fortuño (Credit: © Mauricio Pascual)

Río Grande — Gov. Luis Fortuño promised members of the Puerto Rico Chamber of Commerce that he would be submitting legislation to eliminate commercial property taxes placed on unsold inventory, to improve the local business climate.

However, during the 98th annual CofC convention, he said that achieving that amendment to the island’s Tax Revenue Code would require working in unison with municipal governments, who receive a portion of that tax revenue.

“We’re not going to alleviate this situation, we’re going to eliminate it,” said Fortuño in response to a question posed by CofC Executive Vice President Edgardo Bigas during a question and answer session on Friday regarding the controversial levy that the Tax Reform implemented earlier this year left untouched.

Corporate personal property taxes have historically been a tricky issue because it is basically an honor system that is vulnerable to under-reporting. Tax experts have said it is a very difficult method of taxation. Earlier this year, it was suggested that a better way to shore up tax revenue for the government would be to do away with the personal property tax and replace it with an increase in municipal business taxes, known in Spanish as ‘patentes.’

“We have to find ways to do this without strangling the municipalities, but it doesn’t make sense for us to collect a fee from businesses for the inventory they have left at the end of the year, penalizing them for what they haven’t sold,” said Fortuño, referring to the clause in the island’s tax code that places a tax on inventory.

During the conversation past, present and incoming CofC presidents got the chance to ask the governor a series of questions on a sweeping range of subjects, including what the administration is doing to further the development of the Port of the Americas in Ponce and improve energy costs – an ongoing concern for the private sector.

The energy issue
Current CofC President Raúl Gayá, who ends his tenure tonight, asked Fortuño about long-term energy initiatives in the works to make the island more competitive in terms of costs.

CofC President Raúl Gayá (Credit: © Mauricio Pascual)

“Our goal is to get to the point where we all pay less for electricity and in the process, drastically reduce emissions, while complying with federal and local laws,” Fortuño said. “We’ve approved several important pieces of legislation that establish goals in terms of renewable energy use. Before the end of this year, we’ll break ground on several solar and wind energy projects.”

One project the governor was possibly referring to is the $150 million solar panel farm to be developed by Canadian firm Western Wind Energy Corp. on a 400-acre parcel in Yabucoa. In March, the company confirmed it had signed a 20-year, 30 megawatt photovoltaic purchase power agreement with the Puerto Rico Electric Power Authority.

Fortuño also mentioned the proposed $500 million waste-to-energy plant project in the works for Arecibo, which has already secured all of the required local permits, but is still pending Environmental Protection Agency approvals.

“Puerto Rico’s solid waste problem is very serious. In Puerto Rico we bury garbage and believe that we’re burying the problem, but now we’re paying the consequences, environmentally speaking,” said Fortuño.

Finally, the governor said his administration is lobbying at the federal level to allow the island to be able to transport fuel to be used to generate energy on cargo ships bearing flags other than that of the U.S., the only container ships allowed to deliver goods to Puerto Rico under current U.S. Cabotage Laws.

“That we know of, there are only two vessels that can transport natural gas, so we have a situation in which we could possible open a niche,” he said, adding the cost of energy could drop significantly if fuel could be obtained from foreign sources.

Concerns over stalled Ponce port development

Aerial view of the Port of the Americas.

In a second question, Bigas brought up the issue of the Ports of the Americas in Ponce, a strategic economic development project that has been in the works for the better part of the last decade, but which has been somewhat stalled.

The project was designed to become the hub of maritime cargo transportation in the Caribbean, chiefly because of its 55-foot channel draft and its central location. Its design allows for Post-Panamax cargo ships, which would put Puerto Rico at a competitive advantage in the region.

However, activity related to the port’s construction has been relatively quiet as of late, because it needs $70 million in funding to move forward into the next stage.

“We’re evaluating three potential investors, but the truth is that we have had to move forward until we can have a company come in. We have had a difficult five years not only in Puerto Rico but on an international level, so we’ve had to knock on doors. Potential investors have not been coming to us,” Fortuño said.

A follow-up meeting between central government officials and Ponce Mayor María “Mayita” Meléndez is slated to take place next week, to provide a status update of the project, he said.

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