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Treasury Sets Dragnet For Tax Evaders


April 26, 2001
Copyright © 2001 CARIBBEAN BUSINESS. All Rights Reserved.

Treasury Secretary Juan A. Flores Galarza is embarked on an all-out battle to pin down tax evaders. He has begun embargoing the bank accounts of those owing Hacienda $100,000 or more and next week will go after 10 large companies, each of which owes millions of dollars to the Commonwealth Treasury.

While putting tax liens on property or freezing bank accounts is a Treasury prerogative by law, taxpayers know it is seldom done, and when it does happen, it’s after many attempts to recoup the money owed.

No more, not under Flores Galarza. Last month he began sending tax evaders two certified letters asking them to pay their tax debt. "We first identify clients who owe us $100,000 or more and we verify that the debt is correct. Then we send two certified letters, with proof of delivery. If the debtor doesn’t respond we go to all banks and freeze all accounts, checking & savings," Flores Galarza said. He added that thisvongoing operation brings immediate results.

"Personally, I have received calls from three people I know whose accounts had been embargoed and those checks were on my desk the next day, the full amount, plus interest, for $300,000, $237,000 and $100,000."

Flores Galarza is aware that his predecessors used a preventive embargo as a final warning or last resort. "Not me, I’m using it as my first tool. We want quick results and we are going to get all the money that is due the government. There is a government budget deficit and we are not going to fail the people. Those who owe Treasury must pay," he said.

For the first quarter through April 20, Hacienda placed 552 liens on properties representing a tax debt of $398 million dollars. Of those, 125 liens have been removed due to the collection of $1.98 million in taxes. Some 310 other embargoes, including salaries frozen and liens on properties such as automobiles, have resulted in 40 of those being cancelled after the collection of another $413,879.

Flores Galarza’s next target is 10 of Puerto Rico’s largest corporations, each of which owe Treasury millions. "These are corporations, which have so much accounting & lawyer counseling that they have interpreted the tax law too loosely. Because they have so much counseling, we have taken our time to analyze their last two tax filings and were waiting for them to file this year’s to compare all three," Flores Galarza said. Within days, Flores Galarza anticipates the Commonwealth’s Bureau of Internal Revenue agents will be calling on these companies because by Treasury’s estimates, each owes millions of dollars.

Besides large debtors, there are other targets. In just three months, Flores Galarza has undertaken two additional dragnets. One was aimed at jewelry stores, some suspected of not having a license, and many suspected of not remitting to Treasury the 5% excise tax on jewelry sales. Flores Galarza ordered last month that on a Friday all IRS agents descend at the same time upon 250 jewelry stores around the island.

The result was that 57 were found operating without a license and an additional 150 had the license but did not have it properly displayed. "We could have shut down their stores

and embargoed their jewelry but we have given them the opportunity to go before a hearing and tell us their story. They will be fined," Flores Galarza said. Fines can be as much as 200% of what is estimated the jewelry stores have not paid Treasury.

The other operative was aimed at public employees, to verify if they were filing their tax returns. Of 150,000 commonwealth employees, 10,427 did not appear to have filed. These were sent letters requiring evidence they had filed their tax returns. If they have not they will undergo a hearing and due process of law which could entail losing their jobs. In the case of the 67 Treasury employees among the group, if found guilty of not filing their tax returns, they will be fired immediately, following Hacienda’s bylaws.

This Caribbean Business article appears courtesy of Casiano Communications.
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