Governor to File Tax Reform in Mid-February, Won’t Be Rushed By EVA LLORENS VELEZ llorenseva4@gmail Gov. Alejandro García Padilla said the proposed tax reform legislation will be submitted in mid-February but insisted it will not be evaluated hastily. The governor did not say whether that would have an impact on the crude oil tax hike to $15.50 per barrel from $9.25 per barrel, whose proceeds will be used to pay for a planned $2.9 billion bond issue intended to give liquidity to the Government Development Bank and pay for operations of the commonwealth Highways and Transportation Authority. The approval of the crude oil tax hike, which goes into effect in March, was conditioned upon the approval of tax reform. “Bills are discussed way ahead of time before they are submitted,” the governor said. “We are going to submit the bill on February 15 and if we want to pass it by March 31, we have plenty of time,” he said. García Padilla said the bill is complicated one that needs to be worked on carefully. He praised the island Legislature for taking its time to evaluate bills. The legislation is large in scope, dealing with all aspects of Puerto Rico’s tax laws. “This bill will allow salaried workers to make more money because we are going to reduce the taxes paid to the Treasury Department, so it makes sense to approve it as as soon as possible, but we are going to take our time,” the governor said. As the island looks to shore up its weak budgetary position by raising revenues, it intends to reposition its tax code by reducing its dependence on the collection of direct income taxes and reforming the existing indirect sales and use tax (IVU by its Spanish acronym) by changing it to a value-added tax. The goal would be to reduce the large portion of economic activity in Puerto Rico that is unrecorded and not currently subject to either income or sales taxes. For example, the plan would aim to ensure that 80 percent of individual taxpayers will not pay income taxes by establishing an initial tax threshold of $60,000, while the income tax base would be broadened to make up part of the revenues lost by eliminating or adjusting the current minimum 85 tax expenditures. The plan also contemplates that the gross profits tax, or patente nacional, introduced last year will be repealed and that the corporate tax rate will be equalized with the maximum rate paid by individuals. This would eliminate any need for taxpayers to create flow-through tax businesses or conduits for tax planning purposes. In addition, Tax News reported that there will be an elimination of inefficient business tax expenditures, while alternatives would be considered for the reform or substitution of the four percent Act 154 excise tax, which is imposed on a proportion of the income derived by large multinationals in Puerto Rico. At the same time, so as to minimize the underground economy, the present 7 percent IVU will be transformed into a broader-based goods and services tax, with the intention of introducing a value-added tax at a later date. #AGP
Posted on: Fri, 09 Jan 2015 14:46:17 +0000
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