CPAs concerned over possible end of B2B tax exemption
The head of the Puerto Rico Society of CPAs expressed concern Wednesday over the changes the current administration is proposing to the sales and use tax structure, specifically, the elimination of the business-to-business exemption.
“The CPAs recognizes the precarious fiscal situation the island is facing and understands some changes are needed right now,” said Kenneth Rivera, head of the professional organization.
“However, it is imperative to continue with Treasury Department efforts to achieve increased sales and use tax uptake and reduced evasion, so that [the revenue] reaches public coffers,” he said.
However, he said that in general, the elimination of the exemption for designated and “B2B” services can cause an increase in operating costs mainly because most of the exemptions have no direct impact on consumers.
If the imposition occurs early in the transaction chain, the tax can have a devastating inflationary effect, he said. If taxes are effected on goods, it will have the effect of increasing the price of goods and services that are sold on the island.
“The imposition of the IVU is predicated on that is imposed only to the final consumer of the goods or services and not for consumers in the intermediate chain,” he said.
Such taxation of intermediate levels would have a cascading effect by increasing operating costs and/or the direct costs on Puerto Rico businesses. The Society of CPAs “opposes any initiative that taxes production line goods on the grounds that it could have an inflationary effect on the goods and services produced locally,” he said.
Meanwhile, taxing intermediate B2B services without some sort of break will make them more expensive.
“The Society opposes its approval,” Rivera said. “However, if a decision is made to remove B2B exemptions, then we suggest providing relief, perhaps through a credit or refund,” he said. “”However, we recognize that establishing these credit provisions, while justified, could complicate the system even more, including oversight. That’s why we suggest keeping the B2B exemption, as taxpayers are already familiar with it.”
The organization will continue reviewing measures that represent an impact to the economy and offering advice to decision-makers, the CPA said.