Puerto Rico: Sales Tax Hike Looks Likely
- May 19, 2015 | Gail Cole

It’s no secret that Puerto Rico is in serious need of economic reform; but to make changes, legislators need to agree on a plan. They rejected Gov. Alejandro Garcia Padilla’s plan to create a value added tax (VAT). Now they are faced with a compromise deal that would both increase the general sales and use tax rate and create a new tax on services. The administration is also planning to make approximately $600 million in cuts.
Gov. Padilla’s compromise plan would:
- Raise the general sales and use tax rate from 7% to 11.5%.
- Impose a new 4% tax on certain (as yet undefined) professional services.
- Analyze the pros and cons of implementing a new tax at ports (where there is currently a 6% tax)
The plan could generate $1.2 billion if approved. It would be a start, but only a start, considering that Puerto Rico currently has $72 billion in public debt and “the government could run out of funds in the upcoming fiscal year” (ABC News).

