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Tax Reform Benefits To Reach Almost $8 Billion By 2003
Treasury rakes in $7.075 billion in revenue during FY 2000a 20% jump in 24 months
by BY IVONNE GARCIA
July 27, 2000
When the Rossello administrations tax reform is fully implemented in 2003, individuals will receive $5.8 billion in tax cuts, while economic sectors will benefit by $2.1 billion in tax relief, according to data released by the Treasury Department last week.
Agency statistics show that the various tax reforms and credits approved by the Legislature since 1994 shaved off $360 million in taxes during its first effective year in 1996, an amount that will grow to $1.34 billion by 2003.
"These strategies are first oriented to provide tax relief to the working middle class, which for so many years has carried the burden of paying for government programs, but also have been paired with targeted tax incentives to promote savings and investment," Treasury Secretary Xenia Velez told CARIBBEAN BUSINESS.
In the upcoming 2001 tax year, individuals will enjoy $461 million in tax cuts from the 1994 tax reform, an additional $205 million from the 1999 tax cuts, and will have $8 million less to pay because of an increase in deductions related to child care, youths, and individual retirement accounts, department data shows.
Elimination of the 13-cent tax on cold drinks, which was replaced with the 5% general tax, will also mean $200 million in tax savings for consumers next year, according to Treasury numbers.
Corporations, meanwhile, will have $186 million less to pay in taxes next year, thanks to the 1994 tax reform, in addition to $56 million less because of tax incentives approved in 1998. The tourist, agricultural, film production, and waste management industries will also enjoy a total $45 million in credits.
Total tax cuts for companies and industrial sectors next year will add up to $282 million, which will grow to $334 million in 2003.
Last week, Treasury Secretary Xenia Velez announced that these tax benefits have been coupled by unprecedented growth in tax revenues. In fiscal year (FY) 2000, which ended June 30, revenue to the General Fund, which is fed mainly by income taxes, reached $7.075 billion, or 4% more than the estimate.
Net revenue to the General Fund have grown by 20%, or $1.172 billion in FY 1999 and FY 2000, something Velez hailed as "unprecedented" in Puerto Ricos fiscal history.
While General Fund tax collections were below estimates from 1990 to 1993, collections from 1994 to 2000 have exceeded projections, according to Treasury Department numbers.
Collections exceeded estimates by 9% in 1994 and then by 10% in both 1995 and 1996. However, those percentages dropped to 3% in both 1996 and 1997, and further edged down to 2% in 1999.
"As we become more experienced in the econometric models we use to predict tax collections, we become more accurate," Velez explained. "Also, because we continue to introduce targeted tax incentives, sometimes we cant be so certain as to how collections are going to behave and thats why we have such fluctuations."
This Caribbean Business article appears courtesy of Casiano Communications.