Puerto Rico will delay an increase in a business-to-business services tax by at least two months to allow more time to consider alternatives.
Puerto Rico’s Treasury Department announced Monday that the tax increase would be delayed to June 1.
A 4% tax on services businesses provide to other businesses took effect Oct. 1. Puerto Rico’s government had planned to increase the rate to 10.5% as of April 1 as part of a move from an economy-wide sales tax to a value added tax.
Leading members of both major Puerto Rican parties called for a delay, while the Puerto Rico Chamber of Commerce mounted a campaign against the increase, citing its potentially adverse impact on the economy.
“The Department of the Treasury was ready to start the value added tax on April 1, 2016, however we understand that the postponement to June 1, is necessary to make room for an careful analysis of the tax proposals that are under consideration or will be submitted shortly,” Treasury Secretary Juan Zaragoza G-mez said in a written statement.
Zaragoza G-mez was referring to some competing proposals to raise government revenues. For example, some legislators have called for a tax on goods imported to the island.
The loss of anticipated revenue from the delay will be mitigated by the fact that the 4% existing tax has been bringing in more money than anticipated, Zaragoza G-mez said.
