Bill filed to mitigate inflation by empowering Treasury chief to lower sales & use tax
By John McPhaul
New Progressive Party (NPP) Rep. Joel Franqui Atiles announced on Monday the filing of House Bill 1177, which would create the Consumption Tax Inflation Adjustment Law that lowers the sales & use tax to mitigate the effects of inflation.
“During the past few months, our people have seen a significant increase in the prices of items and products that they regularly purchase for their needs,” said Franqui Atiles, who represents House District 15 (Hatillo, Camuy and Quebradillas), at a press conference. “The impact of inflation has been very marked and threatens to further cut people’s purchasing power. This is an emergency situation that requires quick and detailed action; that is why we developed this bill, which empowers the secretary of the Treasury to adjust the consumption tax so that it is related to the inflation rate.”
The bill, which was joined by the entire NPP delegation, will authorize the Treasury secretary to make adjustments to the percentage of the sales & use tax (IVU by its Spanish acronym) with the aim of protecting the consumer from inflation’s adverse tax effects on the sale price of products.
As detailed in the bill, the Treasury secretary will have the power to make changes to the aforementioned tax through the mechanism of an administrative order. The period of validity of such an order would not exceed 12 calendar months.
The basis for the adjustment will be the Consumer Price Index (IPC), which is published periodically by the Puerto Rico Planning Board. For December, the IPC had a figure of 124,157. The main group showing an increase in its IPC was food and beverages, with an uptick of 0.3.
According to information from the Federal Reserve System, the inflation rate in Puerto Rico has maintained an upward growth rate for the past six months. In August 2021, the rate stood at 3.3 percent. For September 2021, inflation in the United States was at 5.4 percent.
“This is a bill with metrics and mechanisms that make it possible to mitigate the impact of inflation on our people, while, at the same time, guaranteeing the levels of [tax] collections articulated in the budget projections, which, in turn, allows the fulfillment of the contracted obligations,” the legislator said. “This is simple; what we seek is to provide the [Treasury] Secretary with the tools to face dramatic changes in the rate of inflation.”
Inflation is defined as an increase in the prices of goods and services, thus lowering the purchasing power of the dollar.
“We must avoid an economic crisis because of the unsustainability of the inflation situation,” Franqui Atiles added. “We have legislated to increase the minimum wage in order to ease the burden on citizens. For the minimum wage to have a positive and concrete effect on the people, the inflationary effect must be mitigated.”