Puerto Rico's planned April 1 increase in business-to-business consumption tax is running into increasing opposition.
While Puerto Rico has had a sales and use tax on consumer consumption since 2006, a tax on business consumption spending started at 4% on October 1, 2015. The government has plans to raise the rate to 10.5% on April 1.
The change is part of the government's conversion to a value added tax from a sales tax. The government is moving to the former from the latter partly to reduce tax evasion, which politicians and analysts say is widespread.
In a value added tax the tax is collected in portions at every sale in the supply chain, rather than all at once when the product is sold to the consumer.
On Monday, the Puerto Rico Chamber of Commerce called for Puerto Rico's Secretary of the Treasury to exercise his authority to postpone new taxes by 60 days. Subsequently, the Puerto Rico legislature should delay implementation by at least six months, the chamber said.
The tax increase would hurt the economy when it already weak, the chamber said.
In the last few days the candidate for governor from the governor's own party, David Bernier, has also called for the delay of the tax rise, according to news reports from the island.
A postponement of the tax rise would cost the government $50 million a month, according to the El Vocero news website. This would be at a time when it is very late in paying tax refunds, supplier bills, and faces possibly defaulting on bonds on May 1 and July 1.
Puerto Rico Gov. Alejandro García Padilla hasn't made any public declarations indicating that he might change him mind about the tax. However, he is scheduled to deliver his annual state of the commonwealth speech to the legislature at 4 p.m. Eastern Standard Time on Monday and he may address the topic then.
