Recently, the Governor of the U.S. Commonwealth of Puerto Rico proposed a 16% Value-Added Tax. This tax would see the dissolving of an income tax as well as the deductions and credits that go along with it. Puerto Rico has heavy debt and its economy has been near or in recession standing for the past 8 years. Governor Alejandro Garcia Padilla sees the poor economic situation's cause as the failure to collect a significant amount of Puerto Rico's taxes.
This value-added tax looks to charge based on consumption not productivity or income. As a result, getting around paying this tax is near impossible. Under this system Padilla hopes to lower the debt the island has taken on and increase tax revenues.
What issues or benefits can you see if this proposed tax reform is passed?
Who does it harm or benefit? Puerto Ricans or Visitors to the Island?
Source:http://www.reuters.com/article/2015/03/09/usa-puertorico-tax-idUSL1N0WB2HX20150309
3 comments:
There is already an issue of university students protesting against this reform. The primary worry is that private schools will be taxed under this plan. However, Garcia is trying to assure the opposition that this will not happen. It would not really harm visitors so much that it will harm the tourism industry. If anything it is the local people who have to pay for a debt they did not get themselves into.
It looks as if the tourists will be targeted to pay the taxes. Puerto Rico has a huge tourism industry though not the main industry. If it significantly increases taxes, the tourists might start visiting near by islands. This would in fact have negative effects.
This tax would have a negative effect on tourism and also production within the company. If people have minimal income and are charge based on consumption, they will only purchase necessary goods. Thus, possible creating a surplus of goods within the economy.
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