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Puerto Rico Implements Temporary Tax on Offshore Business

Over the weekend, Puerto Rico’s lawmakers approved the legislation to implement a temporary tax on offshore manufacturing businesses in the U.S territories hit by recession.

According to the administration officials, the new tax targets 40 to 50 operating firms on the island and is expected to make more than $75 million every year.

The legislation was cleared by both the Senate and the House along with the party lines on Saturday. The pro-statehood New Progressive Party approved the bill while the minority pro-commonwealth Popular Democratic Country was against it.

House Speaker Jennifer Gonzalez said that equal distribution on the tax burden is important to the future of the economy of Puerto Rico. However, PDP lawmakers and some business groups criticized the legislation for it passed without any public hearings and analysis. They warned that it could cause more economic crisis than the island is already facing.

The island has been in recession since the year 2006, and Governor Furtono has been struggling with the $3.2 billion deficit since he was placed in office in January 2009. This forced him to cut expenditures and fire about 13,000 employees in the public sector.

The temporary tax will start effectively in January 1 and go until the year 2016. On the first year, 4 percent tax will be charged from the firms, followed by 3.75 percent in 2012 and 2.75 percent in 2013.

It will gradually reduce to 2.5 percent in 2014, 2.25 percent in 2015 and 1 percent in 2016.

Puerto Rico is a U.S commonwealth, but it runs in a separate taxing jurisdiction and permits deferral of federal taxes on profits of offshore firms not unless they are sent back to the United States.

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