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Crude Oil Price Hikes Cut Treasurys Coffers
Haciendas excise tax on crude goes down as prices increase, collections drop responsible for 20% of budget deficit this year, Urban Train budget at risk
BY LUCIENNE GIGANTE
May 17, 2001
If crude oil prices remain at present levels, the government of Puerto Rico will close fiscal year (FY) 2001 with $60 million less in excise taxes than last year. Thats approximately 20% of the $300 million Puerto Rico Treasury Department officials now project the governments budget deficit will be this year.
Because of the increase in crude oil prices, so far this fiscal year, the amount of taxes collected on crude oil is $80.6 million, and if the price of oil remains as it is now, between $24 and $28 per barrel, Treasury will collect $101.9 million at the end of this fiscal year, $90 million less than the $192 million it collected in FY 1999 and $60 million less than the $140 million collected in FY 2000.
Puerto Rico imports an average of 32.2 million barrels of crude oil a year, noted Antonio Fernos, auxiliary secretary of Puerto Ricos Treasury Department.
The amount of excise taxes imposed per barrel of crude oil imported to Puerto Rico decreases as the price per barrel of oil increases, as mandated by Section 2.006 of Law No. 5 of October 8, 1987, Puerto Rico Excise Tax Law, otherwise known as "la crudita."
If the price of crude oil is between $0-$16 dollars per barrel, importers pay an excise tax of $6 per barrel of oil. From $16-$24, the per barrel tax is $5; from $24-$28, the per barrel tax is $4. When crude oil price is more than $28 per barrel, the tax drops down to $3.
Excise taxes apply to all crude oil importers unless the crude oil is sold to the Puerto Rico Electric Power Authority, in which case the importer is reimbursed for excise taxes paid. Meanwhile, since 1998 the amount of taxes collected have been mostly used to fund the Urban Train as mandated by law. The Puerto Rico Department of Transportation receives the first $11 million collected in excise taxes on crude oil per month, up to a maximum of $120 million a year.
This Caribbean Business article appears courtesy of Casiano Communications.