Representatives from Puerto Rico’s private sector agreed Monday to back Gov. Ricardo Rosselló’s urgent call to Congress to treat the island as a U.S. — not foreign — jurisdiction in the federal tax reform currently being discussed.
Rosselló insisted that not treating Puerto Rico as part of the U.S. represents “a penalty to American companies that produce products on American soil,” he said.
The private sector coincided with the government that this situation requires that the parent companies of local subsidiaries — particularly in the manufacturing and pharmaceutical sectors — become active and got to Congress with a single claim or risk a “devastating” impact.
During a meeting with the spokespeople of the island’s major trade organizations, Rosselló detailed the specific initiatives that will be presented to be included in the proposed tax reform that is being evaluated in the U.S. Senate.
First, Rosselló noted that Puerto Rico should be excluded from the 12.5 percent tax on intellectual property that will be applied to foreign jurisdictions, as all states of the nation are excluded.
Rosselló is also asking Congress to exclude Puerto Rico from the 10 percent erosion base, which applies to foreign jurisdictions and not the states.
Puerto Rico should also be considered as a full Free Trade Zone to be able to receive a 40 percent payroll credit and a 50 percent credit for Research and Development.
The governor added that jobs would be lost and the economy would stagnate if federal tax reform does not consider Puerto Rico as part of the United States.
“It should be clear that our proposal is not a new [Section] 936,” he said, referring to the tax incentive Puerto Rico offered for decades to American companies to operate and create jobs without paying taxes that was phased out in the 1990s.
“If the purpose of this tax reform is to attract jobs to the United States, it must be emphasized that Puerto Rico is part of the United States, so the island cannot be considered a foreign jurisdiction,” said Rosselló.
More than 20 private-sector executives participated in Monday’s meeting, representing major trade groups, namely:
- Puerto Rico Manufacturers Association,
- Pharmaceutical Industry Association of Puerto Rico
- Puerto Rico Chamber of Commerce
- Retail Trade Association
- Puerto Rico Bankers Association
- Puerto Rico Association of General Contractors
- Home Builders Association
- Community Pharmacy Association
- Hospitals Association
- Shipowners Association
- Puerto Rico Products Association
- Puerto Rico Restaurants Association
- CPA Society
- Puerto Rico Economists Association
- United Retailers Association
- Puerto Rico Chamber of Food Marketing, Industry and Distribution (MIDA)
- College of Pharmacists
- Puerto Rico Realtors Association
- Medicaid and Medicare Advantage Products Association of Puerto Rico
- Puerto Rico Hotels and Tourism Association