Puerto Rico: Processed Food Excluded from Sales Tax Bill

Puerto Rican Senators, a majority of them conservative,  approved Tuesday with a 14 v.12 vote a significant rise of sales tax that will affect the purchase power of most underprivileged while sparing the revenues of multinationals, said opponents.

According to the current legislation, the sales tax will increase from a 7 percent to 11.5 – instead of the 16 percent of value-added tax (VAT) wanted by the administration in a bid to resolve the US$73,000 national debt.

However, the senators amended the text previously approved by the representatives so that processed frozen and canned food would not be included in the measure, under the pressure of various business’ associations, workers’ unions, and even religious leaders, who claimed the measure will hit too hard the poorest consumers.

The bill will now return to the House of Representatives, which will either approve the senators' amendments or send it to a legislative commission that will try to find a consensus.

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Senator Maria de Lourdes Santiago, from the Independence Party, told teleSUR that this measure is “morally unacceptable and fiscally irresponsible,” and will impoverish the country. Not only will the cost of living increase and hit the poorest, she argued, but the small businesses will risk bancrupcy as many services like accounting, legal and commercial services, have been included in the legislation. Giant multinationals, on the other hand, will not be affected as they have their own food distribution system for instance and therefore do not need to pay intermediaries, she explained. The bill will therefore end up being counter-productive in regard with the desired result – reducing the national debt.

It would be much more efficient, like the Independence Party proposes, to modify the preferential treatment that big foreign companies enjoy thanks to secretly negotiated bilateral agreements. These companies hardly pay more than 4 percent tax, she claimed.  

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