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  • Writer's pictureThe San Juan Daily Star

Fiscal effect of room tax cut for local residents is small, Legislature’s budget office says

Sen. Ramón Ruiz Nieves

By The Star Staff

The fiscal effect of legislation that would establish a 3% exemption in the payment of the room tax to Puerto Rico residents is about $14 million, the Legislative Assembly Budget Office (OPAL by its Spanish acronym) has estimated.

The office evaluated Senate Bill 1257, which seeks to establish the room tax cut to promote domestic tourism.

“The fiscal effect of implementing this measure was estimated at $14.7 million on the budget of the Tourism Company, and not on the General Fund,” the report notes. “In terms of the General Fund, SB 1257 has no effect since said inputs do not go into the Department of the Treasury.”

To estimate the effect of the measure, the OPAL made assumptions that the room tax rates were 7% for hotels and 11% in hotels with casinos.

The measure, which was authored by Sens. Ramón Ruiz Nieves, Javier Aponte Dalmau and Elizabeth Rosa Vélez, seeks an amendment to Act 272 of 2003, which establishes the room tax to grant tax relief to the residents of Puerto Rico, define domestic tourism, promote local tourism, and for other purposes.

The measure notes that the government’s mission is to provide and guarantee constituents the best possible quality of life. Tourism is a fundamental part of the local economy. The initiative aims to promote and encourage internal tourism and access of Puerto Rico residents to the island’s inns and paradores.

Due to various atmospheric events and the COVID-19 pandemic, tourism activity has decreased in recent years, the bill says.

“It is necessary to encourage the local economy, promoting the utilization of resources through tax relief for residents of Puerto Rico,” the bill notes. “Domestic tourism is a beneficial activity for society since it allows residents to enjoy the beauties and landscapes that Puerto Rico offers. At the same time, internal tourism guarantees jobs and injects [capital] into the economies of the municipalities, resulting in a win-win experience for all parties.”

The measure also defines “resident of Puerto Rico” as a person who has an official identification from the commonwealth, such as a driver’s license, and has a residence in Puerto Rico.

Likewise, “internal tourism” is defined as: “when a resident of Puerto Rico occupies any room or rooms of a Lodging, or the right to use or possess the services and facilities inherent to the use or possession of a room by a period of no more than five nights.”

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