Study: Puerto Rico lost $18B to investor tax incentives
Puerto Rico No Se Vende, a coalition advocating for fiscal justice and transparency, warns that the island’s tax incentive system could cost the government more than $18 billion in lost revenue between 2024 and 2030 under Act 22, which is now part of Act 60, alone.
The figure, drawn from the group’s report “Dolor y lucro: los inversionistas con múltiples exenciones contributivas que empobrecen a Puerto Rico” (“Pain and Profit: Investors with Multiple Tax Exemptions that Impoverish Puerto Rico”), is four times higher than the government’s previous projection of $4.4 billion in losses for the 2020-2026 period.
“For the past three years, our work has focused on studying the impact and supposed benefits of Act 22, and the data is clear: the government loses far more than it collects,” said Ane Hernández, spokesperson for the coalition.
“This latest Treasury report reflects $18 billion that could be invested in energy, pension payments, hospitals and schools. While the country is impoverished, the government prioritizes millionaires who buy properties, displace people and fail to pay taxes,” she said.
The law, known as the Act to Incentivize the Relocation of Individual Investors to Puerto Rico, was enacted in 2012 to attract high-net-worth individuals to the island. Beneficiaries receive full exemptions on interest, dividends and capital gains.
Government data show that while 5,800 decrees have been granted under the law, only 2,600 remain active, according to the report.
The coalition’s report criticizes what it calls a system of overlapping tax privileges that benefit wealthy investors through multiple exemptions while shifting the fiscal burden to residents. It cites cases such as Genera PR, a subsidiary of New Fortress Energy, which operates under Act 60 with a reduced 4% tax rate and exemptions on payments to shareholders, municipal taxes and property taxes.
The group argues that this model “privatizes profits while the public bears the costs” through higher electricity bills and limited accountability.
Beyond San Juan, the report warns that speculative development and displacement are spreading islandwide. Projects such as Ocean Drive Development, Oro Residences and the $2 billion Esencia megaproject in Cabo Rojo — granted nearly $500 million in tax exemptions — illustrate what the coalition calls “state-subsidized luxury.”
“Each exemption granted with our taxes to a luxury project is a collective sacrifice,” said Beatriz Llenín-Figueroa, spokesperson for the Defend Cabo Rojo coalition.
“It means the destruction of ecosystems and biodiversity amid the climate crisis and fewer resources for affordable housing, essential services and sustainable development,” she said.
Puerto Rico No Se Vende also denounced what it described as a lack of transparency surrounding tax decrees. Since 2023, the coalition has filed multiple information requests under the Transparency Act seeking data on decree compliance and cancellations.
The Department of Economic Development and Commerce (DDEC, in Spanish) responded by referring the group to a limited online database that lists only names and issuance dates, without information on compliance, contributions or revocations, the coalition said.
“Amid the debate over Senate Bill 63, it is important to understand that the government has not provided access to a reliable and comprehensive database that would allow the public to verify that these incentive programs are operating in the best interests of the country,” said Issel Masses, executive director of Sembrando Sentido.
The DDEC has begun expanding oversight through its Office of Incentives for Businesses, News is my Business reported last week. Agency reports show that more than 1,700 decrees have been audited through amendment reviews, covering individual investors and export service companies.
About 29% of individual investors and 15% of service exporters remain out of compliance, prompting 305 deficiency notices with penalties of up to $10,000 and possible revocations.
The agency has also formed a Compliance Review Committee to evaluate cases and is collaborating with the Treasury Department and the U.S. Internal Revenue Service to share data and enforce reporting rules.
New reporting requirements are being implemented for industries including medicine, science, tourism and creative sectors, all of which must file annual reports starting in 2026 or face fines and decree cancellations, DDEC Secretary Sebastián Negrón said during a roundtable with reporters.
The DDEC has also opened a confidential email address to receive compliance tips.
Despite these steps, the coalition argues that government action has come too late.
“It has taken the government 13 years to implement oversight mechanisms, and it is already too late for that,” Hernández said. “The only responsible action is to eliminate this incentive.”
The report also examines other tax structures, including Act 60 (covering individuals, export services and energy), Act 74 (tourism), Act 273 (financial institutions) and Opportunity Zones.
“The most alarming thing is that Act 22 is only a tiny fraction of a system of tax privileges from which they benefit multiple times over, while the rest of the island bears the losses,” Hernández said.
This report clearly carries an anti-capitalist sentiment, fostering division between locals and investors by publicly naming them as culprits under the guise of awareness. Investors are unfairly targeted despite abiding by the law, while the real need is for policy reform and thorough auditing. Terms like “gentrification” and “climate crisis” are left-leaning buzzwords used to scapegoat investors, with displacement wrongly attributed to progress and investment. The report’s tone reflects an anti-American undercurrent that does more harm than good. Ultimately, this report exhibits a poor mentality rather than constructive advocacy.
Key contrasts include:
• The report scapegoats investors instead of focusing on necessary government policy reforms and management accountability.
• It promotes a divisive “us-versus-them” narrative fueled by anti-capitalist language and branding that alienates investors and undermines unity.
• It mischaracterizes investment as the cause of displacement, disregarding complex socioeconomic realities and governance failures.
This report does not champion Puerto Rico’s people; it reveals a poor mentality obstructing meaningful progress.
Many of the projects wouldn’t even be done without the tax incentives. So you can’t count them as a tax loss if they didn’t get built. As far as the lower taxes on interest all real residents of Puerto Rico should only pay the 4 percent tax rate on interest earned and capital gains. That would be fair for all of us non act 22 people