Private sector warns Senate’s HB420 revision creates new inventory tax
A coalition of Puerto Rico’s leading private sector organizations is warning that a Senate-approved amendment to House Bill 420 could result in what they describe as a new and significantly burdensome tax, potentially increasing consumer prices and threatening commercial viability for retailers.
In a June 25 letter to House Speaker Carlos “Johnny” Méndez, the heads of nine major business groups expressed “extreme concern” over the amendment. The original bill aimed to freeze Puerto Rico’s long-standing inventory tax, which retailers have criticized for discouraging stockpiling and contributing to supply shortages.
However, the Senate’s amendment would replace that structure with one that applies the personal property tax at the time of sale, rather than on goods held in inventory. Business leaders argue this would dramatically expand the tax base and place a far heavier burden on the island’s commercial sector.
The coalition offered an illustrative scenario: For a business with $10 million in inventory that turns more than 10 times per year, the tax liability under the proposed system would rise from $100,000 to $1 million — an increase of 900%.
“This example illustrates a catastrophic impact for retailers and consumers,” the letter stated. “If applied at the time of sale, the nearly 10% charge established in the amendment would increase the price of all items sold by that same proportion, further impoverishing Puerto Ricans.”
The signatories include leaders of the Puerto Rico Restaurants Association, the Chamber of Food Marketing, Industry and Distribution (MIDA, in Spanish), and the Puerto Rico Chamber of Commerce. They emphasized that while they continue to support eliminating the inventory tax, the proposed amendment is not a viable solution.
“If we interpret this amendment correctly, it is dangerous for commerce and citizens,” the letter continued. “It constitutes a new tax and an additional economic impact of hundreds of millions of dollars that will fall directly on the pockets of the Puerto Rican people.”
The organizations urged lawmakers to work collaboratively on reforms that eliminate the inventory tax and “do not generate new burdens on businesses or consumers.” They also called on the House to uphold the administration’s stated policy of not enacting new taxes.
“We strongly request that you honor the commitment of the current administration of not imposing further taxes to the people of Puerto Rico and reject the amendment proposed by the Senate,” the letter concluded.
