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  HOME | Caribbean

US Tax Overhaul to Hurt Puerto Rico, Governor Says
Ricardo Rossello said “the tax reform ... is the worst thing to come out of all this and is a product of the fact that we don’t have representation, that we don’t have senators and that they didn’t have to take Puerto Rico into account when they made the decisions”

SAN JUAN – Still reeling from the effects of Hurricane Maria, the Puerto Rican economy will suffer further damage from the tax overhaul approved last week by the US Congress, Gov. Ricardo Rossello said on Wednesday.

“The tax reform was harmful for Puerto Rico. It’s the worst thing to come out of all this and is a product of the fact that we don’t have representation, that we don’t have senators and that they didn’t have to take Puerto Rico into account when they made the decisions,” he said in an interview with EFE.

Though the final version of the bill omitted a proposed 20 percent levy on imports of Puerto Rican products to the mainland United States, the text does include a 12.5 percent tax on income arising from US patents and licenses held by foreign firms outside the country.

Puerto Rico is a US commonwealth, but for tax purposes, companies with operations on the island are treated as foreign entities.

The new intellectual-property tax leaves Puerto Rico at a disadvantage in competition with other international destinations for business investment, the governor said, because those jurisdictions are not subject to US laws, standards and regulations that can increase the cost of production.

The hope now is that Congress will go back and amend the legislation to either exempt Puerto Rico from the new tax or create offsetting incentives for investment on the island, Rossello said.

Rossello, whose center-right PNP party favors US statehood for Puerto Rico, cited the tax bill as an example of why the island needs to have voting representatives in Congress.

“Not having representation ... we don’t have the sane resources and we don’t have the same results,” meaning that “Puerto Rico can be run over as was done in the recent tax reform,” the governor said.

Mired in a decade-long recession and burdened with an unpayable $70 billion debt, Puerto Rico was already struggling before Hurricane Maria made landfall Sept. 20, but the damage to infrastructure and steep drop in economic activity as a result of the collapse of the power grid have made the situation even worse.

The official death toll stands at 64, yet the actual number of storm-related fatalities is thought to be more than 1,000, while property damage is estimated at $94 billion.

Regarding the progress of recovery efforts following the hurricane, Rossello was critical of the contribution made by the US Army Corps of Engineers.

“In terms of the greatest disappointment, it has been the response of the Corps of Engineers to rebuilding Puerto Rico’s electricity system,” the governor said. “Specifically, they suggested to us that they were going to work quickly and that it would be completely done in 45 days.”

But the reality was quite different.

“Forty-plus days later the workers had still not arrived and even today we continue to have problems in terms of delivery of materials,” Rossello said.

Standard disaster-preparedness measures were no match for “the largest (storm) in the modern history not only of Puerto Rico, but of the United States,” he said.

“The good thing is that we have detailed the structure of recovery and that’s what we will focus on in the coming years. Now some additional resources are arriving that will allow us not to rebuild Puerto Rico as it was in the past, but instead rebuild it as it should be, with a modern energy system,” Rossello said.

 

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