Fiscal board urges tax reform within budget planning

Robert Mujica, executive director of the Financial Oversight and Management Board for Puerto Rico

By THE STAR STAFF

Discussions on tax reform must take place alongside budget talks as the island moves from crisis management to strategic planning, Robert Mujica, executive director of the Financial Oversight and Management Board for Puerto Rico, said Wednesday.

“Conversations need to happen now. We are no longer in a crisis budget; we are in strategic planning,” Mujica told reporters at a press conference.

He emphasized that tax credits do not address the structural deficiencies of Puerto Rico’s current tax system, which he described as uncompetitive and limiting to growth.

“Reforming it will require difficult decisions and consequences,” he said. “But maintaining the current structure also has consequences: among the highest corporate tax rates in the country and high personal rates with low thresholds. These conversations must happen now to achieve comprehensive reform.”

Mujica argued that the current system, with high statutory rates and unequal exemptions, does not foster economic growth and incentivizes the informal economy. He called for broadening the tax base to allow for lower rates, including corporate and consumption taxes.

At the same time, he reiterated that the Puerto Rican government must reduce its spending and build up fiscal reserves.

“The board agrees that the people deserve tax relief,” Mujica said. “A one-time refund can be implemented responsibly as a comprehensive reform is developed, but it should not compromise long-term fiscal stability.”

He stressed the need to strengthen critical reserves, reestablish the unfunded Budget Stabilization Fund, and create an infrastructure capital fund, formally separating those resources from the General Fund. He noted that nearly 90% of infrastructure investment relies on federal funds, highlighting the need for local planning and financing. Credit rating agencies also assess fiscal discipline and capacity to support long-term investments, he added.

Mujica said recent data points to a decline in revenue compared to last year.

“General Fund revenues, with data through November 2025, are slightly above projections but lower than in the previous two years and among the lowest since 2022. It is still early to determine if this is a trend, but it could indicate an economic slowdown as federal stimulus and recovery funds decrease,” he noted.

The oversight board executive director said the budget will be presented to the Legislative Assembly on May 8 and certified before June 30, in accordance with the Fiscal Plan.

Separately, Mujica also said that by the end of the week he expects to have a decision about the governor’s proposed tax relief checks.