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).
Avalara Author
Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.