Este informe no está disponible en español.


PRIIF: Legal Or Not?

By Carlos Romero Barcelo

September 9, 2004
Copyright © 2004 CARIBBEAN BUSINESS. All Rights Reserved.

Immediately after the publication of the poll showing an increase in gubernatorial candidate Pedro Rossello’s margin over Anibal Acevedo Vila from 7% to 9% and substantial improvement in specific areas of the campaign issues–such as capacity and ability to handle the escalating crime wave, to put in place a good health-delivery system, to improve and modernize education, to create jobs, and to improve the infrastructure–the House Treasury Committee reinitiated a forgotten two-year-old investigation.

The first salvos were launched against Rossello, stating that an illegal transfer of funds had been made to the Puerto Rico Industrial Incentives Fund (PRIIF). The transfer of funds allegedly hadn’t been authorized by the Legislature. Rep. Francisco Zayas Seijo, the Popular Democratic Party’s (PDP) candidate for mayor in Ponce, accused Rossello of violating the law and accused former treasury secretary, now comptroller, Manuel Diaz Saldaña of having illegally transferred tax-revenue funds to the PRIIF.

Having made those false charges, which the press readily accepted without verifying the facts or the law, Zayas Seijo and his colleagues followed with accusations, without any sustainable evidence. They failed to mention, however, the participation of Ramon Cantero Frau in the handling of the PRIIF when he was in charge there and his granting funds to Vectron, a corporation that didn’t qualify.

The persecution of Comptroller Diaz Saldaña went so far as to deny him the opportunity to read a statement before the beginning of the committee’s interrogation. The naked abuse of power, so typical of the leadership of the PDP, couldn’t have been more obvious.

When I read what had happened, I called the comptroller and asked him if I could have a copy of the statement he hadn’t been allowed to read. Upon reading the statement, it became obvious why he hadn’t been allowed to read it. In his statement, he carefully explains his participation and demonstrates why the transfer of funds had not only been legal but had actually been authorized by law, which, for some unexplainable reason, the PDP legislators were trying to hide from the press and the public.

Not only did Diaz Saldaña demonstrate that the PRIIF had been established by law. He also charged the legislative committee and the investigators with having violated the laws that protect the privacy of taxpayers and make it a crime for an employee or official of the tax department to allow third parties to have access to income tax returns or to give third parties any information contained in the tax returns. See 13 LPRA Section 8056 and the taxpayer’s Bill of Rights (13 LPRA Section 8012). However, the press hasn’t seen fit to investigate who committed these crimes against taxpayers’ right to privacy.

The committee blatantly lied to the people of Puerto Rico and to the press, and many of the members of the news media still keep making the same unfounded accusation that the PRIIF was established illegally, and they have failed to investigate and explain to the public the illegal acts that were committed by Treasury’s officials. They have also repeated the lies that Zayas Seijo and his legislative committee have been telling the people.

  1. The false charges based on lies made by the committee are:
  2. That the transfer of funds to the PRIIF wasn’t authorized by law and therefore was illegal.
  3. That the government of Puerto Rico failed to collect any taxes from the 17 tax-exempt companies investigated, and that the amount allegedly forgone between 1997 and 2000 was in excess of $1.4 billion. That Cantero Frau’s (the governor’s husband) wrongdoing with the granting of $5 million to Vectron was properly investigated and that everything was allegedly done according to the law. Therefore, according to the PDP leadership, there is no need to investigate Cantero Frau.

In the first place, it is ludicrous for the leadership of the PDP to be making charges against the New Progressive Party (NPP) leadership for not taxing the 936 companies. It was precisely I, as president of the NPP, who made a campaign promise in 1976 to tax the until then 100% tax-exempt corporations.

I did so because the 100% tax exemption was totally unnecessary and created an unfair tax situation in which small businesses, entrepreneurs, public and private employees, doctors, attorneys, engineers, and other technicians or professionals paid the taxes that the wealthiest corporations didn’t pay. I insisted the tax burden on the individuals and small corporations in Puerto Rico was too high and abusive, and we needed to collect taxes from those that earned the most to reduce the taxes of those that earned less. During my administration, we started the first income-tax-reduction plan in Puerto Rico since income taxes had been enacted. The PDP has always raised taxes; we have lowered them.

It was precisely the leadership of the PDP that adamantly defended the tax-exempt corporations. It has been, and is, to the Populares these companies have contributed millions of dollars in elections and in status plebiscites. The "Populares" have given benefits of billions and billions of dollars to the corporations and have waged campaigns of fear and lies, promoting an inferiority complex in many Puerto Ricans who were led to believe their tale: that we couldn’t bring manufacturing industries to Puerto Rico unless we gave them 100% tax exemption. We have proved that to be a lie.

When I saw the abuse of power the PDP legislators were committing against the comptroller, I called a press conference to clear up at least part of the issue and to point out the misleading statements and the lies of Zayas Seijo and the other PDP leaders.

In the press conference, I distributed copies of Law 135 of Dec. 2, 1997, which specifically establishes the PRIIF. Section 16, Subsection (C) of the law reads as follows (stress added): "The secretary of the treasury shall establish a special fund [PRIIF]...into which five percent (5%) of the income tax paid by businesses exempted under this part shall be covered. Also to be covered into this special fund shall be the special surtax levied on exempted businesses under the Tax Incentives Act of 1987, 10038-10052 of this title [Title 13].... The moneys of the special fund established herein shall be used exclusively for the following purposes: (1) Support for scientific and technical research and development of new products and industrial process... (2) The development and implementation of special programs to counteract the problems facing those persons or families that because of chronic unemployment or for any other reason have suffered economic deprivation... (3) To provide special incentives for the establishment in Puerto Rico of industries of strategic importance to the government of Puerto Rico... The secretary of Economic Development & Commerce is hereby empowered with the necessary and sufficient discretion to use the moneys of the Special Fund.... The secretary of Economic Development & Commerce shall establish the criteria to be used for the disbursement of the Special Economic Development Fund moneys through regulations."

As you can see, the law specifically creates a fund and instructs the secretary of the treasury to deposit into the fund 5% of the income tax paid by exempt businesses.

Finally, we see in full splendor the corrupt administration of Gov. Sila Calderon, who not only has violated the law by obstructing the investigation of her husband, Ramon Cantero Frau, but also gave her then lover the $1 billion Special Communities Program to administer. An obvious conflict of interests. In two years, he spent and pledged more than $500 million–most of it to his friends and PDP donors.

The PDP candidate for governor, Anibal Acevedo Vila, has been declared a liar by the federal Court in Puerto Rico and was reprimanded publicly, but he didn’t seem to mind. Of course not, he has done much worse. He received $20,000 in violation of electoral laws and illegally deposited it in a personal account with his sister. Later, he illegally ordered the PDP to repay the $20,000 he had illegally deposited in his account. He also, as a member of the House of Representatives, illegally received a $10,000 check for the PDP and $7,000 in cash from Tommy Habibe. All this, the secretary of justice has refused to investigate. And then the Populares have the audacity to talk about corruption.

Carlos Romero Barcelo is a two-term former governor of Puerto Rico (1977-84), a two-term former resident commissioner (1993-2000), and a two-term former mayor of San Juan (1969-78). He was president of the New Progressive Party for 11 years.

This Caribbean Business article appears courtesy of Casiano Communications.
For further information, please contact:



Self-Determination Legislation | Puerto Rico Herald Home
Newsstand | Puerto Rico | U.S. Government | Archives
Search | Mailing List | Contact Us | Feedback