The Puerto Rico Marketing, Industry and Food Distribution Chamber (MIDA for its Spanish acronym), filed a lawsuit Thursday against the government, asking the San Juan Superior Court to declare the so-called “national tax” unconstitutional and order the Treasury Department to immediately publish exemption regulations.
The trade group claims, among other things, that the national tax imposes a burden that averages 80 percent of revenue on local businesses, which in some cases may exceed 150 percent, while other sectors that generate more have to pay nothing.
“In other words, the ‘national patent’ is causing Puerto Rican entrepreneurs competing in very difficult circumstances to end up generating losses in their operations and thereby threatens the survival of business and economic activities done in benefit of the consumer and the island,” MIDA said in a statement issued along with the lawsuit documents.
MIDA claimed that it turned to the court after exhausting all legal and administrative remedies to ensure that new tax laws were fair and reasonable, most notably the “national patent.”
“We can not remain indifferent to what constitutes an affront to the initiative and economic activity developed by Puerto Rican entrepreneurs that, far from helping to find solution, increases the economic crisis the island is facing,” MIDA stated.
The lawsuit filed by MIDA and retailer Hatillo Cash & Carry, names Treasury Secretary Melba Acosta as a co-defendant.
The “national patent” was approved under Law 40 of this year, which amended Puerto Rico’s Internal Revenue Code to impose a surcharge on businesses generating more than $1 million in annual gross revenue. The law also authorizes Acosta to implement regulation to grant waivers, a document yet to be drafted, the lawsuit claims.
“Acknowledging the serious damage it could cause companies, the law itself includes a waiver mechanism. However, in practice this mechanism is ineffective and, worse, gives the Treasury Secretary absolute powers to determine the tax without criteria or guidelines to prevent arbitrary and discriminatory treatment,” MIDA said.
The trade group said filing an application for a waiver costs $1,500 and preparing the required documents up to $10,000 for a two-year exemption.
“It places another requirement on taxpayers with less profit or even losses of having to spend money they do not have, without having an idea of how Treasury will make its determination and knowing that it does not solve the problem permanently,” MIDA said.