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Nine Business Organizations Commit To Section 956 Amendment Efforts
Statement Of Principles To Be Presented To U.S. Congress By Resident Commissioner
By MARIALBA MARTINEZ
September 25, 2003
Nine local business organizations signed an agreement with the Department of Economic Development & Commerce (EDC) committing them to the Calderon administrations quest for an amendment to Internal Revenue Code Section 956.
The Section 956 amendment remains one of the principal economic development strategies of the Calderon administration despite its failure to obtain approval from the U.S. Congress. In fact, U.S. Ways & Means Committee Chairman Rep. William Thomas proposed a similar amendment to Section 956 that would benefit U.S. states as well as Puerto Rico.
Gov. Sila Calderons proposal calls for a 90% tax deferral on taxable income invested in U.S. property or the exclusion of 85% of dividends received for income that is attributable to active business operations in Puerto Rico or other U.S. territories. In March 2002, the U.S. Congress Joint Committee on Taxation revealed the tax amendment would cost the U.S. Treasury at least $11.3 billion over an 11-year period plus another $21 billion over 10 years for a provision for the transfer of intangibles such as patents or the cost of brand-name advertising.
The organizations signing the commitment were the Association of Puerto Rican Products, Food Marketing & Distribution Industry Association, Pharmaceutical Industry Association of Puerto Rico, Puerto Rico Bankers Association, Puerto Rico Export Council, Puerto Rico Chamber of Commerce, Puerto Rico Hotel & Tourism Association, Puerto Rico Manufacturers Association, Securities Industries Association of Puerto Rico, and United Retailers Association of Puerto Rico.
Each organizations principal signed the document, called Statement of Principles-Economic Stimulus for the Commonwealth of Puerto Rico, during a meeting with EDC Secretary Milton Segarra in August. According to Segarra, the document will be presented to members of the U.S. Congress by Puerto Rico Resident Commissioner Anibal Acevedo Vila as evidence of the private sectors, particularly the business sectors, commitment.
"The alliance of the most important business leaders supporting Section 956 is vital to carry the message of the importance and impact of this economic development measure," said Segarra in a statement. "The key message is that a healthy Puerto Rican economy is a healthy U.S. economy because we are an important financial partner that contributes revenue and jobs to the U.S. economy. This isnt a political issue; it is a favorable economic development matter for Puerto Rico."
The statement reads in part: "In 1996, Congress enacted a phaseout of Section 936, which has been a tax incentive designed to attract investment to the island and available for the past 75 years. Since the enactment of the phaseout, the island has lost 18%, or 27,000, of its manufacturing jobs, most of which have gone to foreign countries. The phaseout of Section 936 not only removes federal incentives for investment for Puerto Rico but it effectively eliminates any economic value of tax benefits Puerto Rico has instituted in the Commonwealths tax code because of the structure of the U.S. tax code.
" The undersigned participants, who represent over 90% of the private sector in Puerto Rico, support and join in the efforts of the Commonwealth to urge the prompt enactment of the Section 956 proposal in order to preserve the flexibility of the Commonwealths tax system and to provide a level business environment so the Commonwealth can compete effectively with investments targeted for offshore locations."
This Caribbean Business article appears courtesy of Casiano Communications.