Individual investors paid nearly $100M in taxes in 2017-2018, DDEC report shows
Beneficiaries of the Individual Investor Incentive program under Law 60, or the Puerto Rico Tax Code, paid nearly $100 million in taxes in 2017 and 2018, according to the Department of Economic Development and Commerce’s (DDEC, in Spanish) “Annual Report on the performance of the incentives granted under the Puerto Rico Incentives Code.”
The first edition of the report revealed that taxpayers benefiting from this tax provision paid more than $51 million during 2017, down from the $44 million in 2018.
Due to limitations in the data for the years 2019 and 2020, the report focused its results and findings of incentives granted to resident investors, qualified physicians and researchers and scientists for the mentioned years.
The DDEC’s goal is to add results and findings periodically as the progress of data collection continues.
“For decades, the Government of Puerto Rico has created and established several incentive programs without comprehensively analysing their economic and fiscal impact, which has prevented having reliable information on the cost and convenience of these investments,” said the DDEC Secretary Manuel Cidre.
These decrees do not have a direct cost to the government’s coffers since they do not require the distribution of funds to the beneficiaries, the agency noted.
In addition, the transfer of these individuals to the island results in direct and indirect benefit to the public coffers, since they buy goods, products, services, and housing, and create jobs, among other things, which would not happen without the granting of the incentive, Cidre said.
The other model analysed was the Qualified Physician program, which was created with the goal of offering a tax structure to avoid losing health professionals, and to retain and make their medical practice attractive in Puerto Rico.
The report showed that the return on on ivestment for each year considered is negative for both years: -55.3% for 2017 and -56.7% for 2018.
However, the program had a social impact to consider, of which 27% of the doctors included in this analysis created additional jobs and there was an increase of about 35% in the total salaries paid to employees, the report showed.
The third incentive analysed was that of Scientific Researchers, which sought to attract and retain distinguished researchers to stimulate research activities as one of the means to improve the island’s position in the knowledge economy.
During 2017, 49 applications were approved among 33 beneficiaries, as a researcher can have multiple eligible research projects and by 2018, 63 applications were granted among 50 beneficiaries.
Even though the return on investment for both years considered in the analysis is negative when evaluating the R&D numbers in Puerto Rico’s overall framework, a historical increase in scientific publications in universities and an increase in patents since 2016 was evident in the study.
“With this study, we begin the analysis of the incentive model that has served Puerto Rico as the main tool to attract investment and insert capital into the treasury,” said Cidre.