CRIM hopes to reach consensus on inventory tax

Municipal Revenue Collections Center Executive Director Reinaldo Paniagua Látimer

By The Star Staff

Municipal Revenue Collections Center (CRIM by its acronym in Spanish) Executive Director Reinaldo Paniagua Látimer expressed hope Thursday for a consensus on the language of the Inventory Tax Bill.

The bill has already been approved by the island House of Representatives but was amended in the Senate this week, leaving it pending for final approval until June 30. The business sector believes the amendments have made the legislation less favorable.

The inventory tax is imposed on businesses based on the value of their inventories, which includes finished goods (ready for sale), partially assembled products (work-in-process), and raw materials. The tax serves as a funding source for financially struggling municipalities, but the business sector is advocating for its elimination.

An amendment introduced in the Senate would allow the tax to be collected at the point of sale.

“The bill was approved on Tuesday night with some amendments. It proposes to reduce the tax freezing period from five years to two. If a solution isn’t reached within that five-year timeframe, further legislation will be required,” Paniagua Látimer noted. “We have not yet had the opportunity to review the bill’s details, and as they have not been provided to us, our technical team is currently verifying the information. Once this process is complete, the tax would be collected at the time of sale. However, I believe this approach is a mistake because it does not align with the municipalities’ original proposal, nor has it ever been our intention to create a new tax.”

He said the aim of the bill is to address a longstanding complaint from a segment of the commerce sector, which argues that they should not have to pay the inventory tax multiple times for the same item.

“Merchants feel penalized for being charged the tax regardless of whether the item sells,” Paniagua Látimer said. “For instance, if a business sells hydraulic hoses or car tires, they end up continuously paying this tax on items that may not sell quickly. We understand that this is unfair.”

The CRIM chief emphasized that the proposal does not introduce a new tax; rather, it seeks to change how the tax is calculated.

“Instead of being based on the average storage tax a business incurs month by month, we suggest that the inventory tax be based on items that have already been sold,” he said. “This means the tax will not need to be paid upfront. It’s important to note that this tax is paid by the merchants, not by the taxpayers.”