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Puerto Ricos Tax Incentive Structure Competitive
BY MARIALBA MARTINEZ
November 30, 2000
A comparative analysis of industrial incentives in Ireland, Singapore, Malaysia and Puerto Rico found that the Caribbean island has closely tracked and adopted some of the most successful steps taken by foreign countries to attract pharmaceutical manufacturing operations.
The study was prepared by accounting firm Ernst & Young LLPs partners Ernest F. Aud Jr., Jorge M. Cañellas, and Teresita Fuentes and presented during the Pharmaceutical Industry Association of Puerto Ricos conference two weeks ago.
"Optimum location solutions are based on a number of factors that may vary depending on each country," said Fuentes. "One factor is the maximum return on investment, which requires access to market, such as proximity to transportation; minimized costs, such as subsidies that reduce operating costs and maximize earnings; and efficient tax structures, such as supportive infrastructure and a productive and available workforce.
"Companies should also look for financial incentives and an efficient start-up, with permits processed on a timely fashion. The bottom line is that combined operational requirements, with efficient cost and finance structures, yields competitiveness."
Other criteria mentioned were labor costs, employer benefits, labor availability, productivity, labor-management relations, governmental relations, councils and unions, and dismissal and severance regulations.
Fuentes also mentioned quality of life factors (individual tax rates, security, housing, schools, healthcare, weather and culture); and geographic factors (political and economic stability; real estate, telecommunications, travel accessibility, time zone).
An important point made by Cañellas while reviewing Ireland, Singapore and Malaysias tax incentives was that incentives were not based on direct jobs, contrary to Puerto Rico standards. Irelands incentives are based on the amount of investment and type of industry while Singapore seeks high technology companies. Malaysia offers its incentives based on the capital investment per employee ratio, instead of the number of jobs created.
"Puerto Rico is a competitive location in most criteria that an international company could use to determine where to open new operations. In fact, in some areas we exceed other countries. For example, Puerto Rico offers 90% property tax exemption and 60% municipal license tax exemption," said Aud.
Other factors favoring Puerto Rico were its political stability, infrastructure, energy system, telecommunications structure, location and shipping facilities. Puerto Ricos available facilities, consulting services, reasonable labor costs and training grants also provide preferential status when choosing a new location site.
This Caribbean Business article appears courtesy of Casiano Communications.