OMB details sources to fund tax reform, which is $200 million short

Office of Management and Budget Executive Director Orlando Rivera Berríos

By THE STAR STAFF

Office of Management and Budget (OMB) Executive Director Orlando Rivera Berríos detailed before lawmakers earlier this week the funds allocated to cover the cost of proposed amendments to Puerto Rico’s Internal Revenue Code.

The latest tax reform proposal, which will reduce tax rates for taxpayers, costs about $500 million, but the government is more than $200 million short.

Rivera Berríos said simplifying tax returns and implementing other cuts would generate some $280 million in savings, while exemptions for electric vehicles and solar equipment account for the remainder.

“We’re talking, Mr. Chairman, that the simplification of tax returns, with a discount of 5 and 8 percent, generates $280 million in savings,” the OMB chief said during a public hearing on Tuesday. “We have the exemption for electric vehicles, which generates $30 million, the exemption for imported promotional materials at $1 million, and the exemption for solar equipment at $18 million. That totals $329 million. With the reduction in public spending we’ve carried out in 2026 and that is being implemented in the 2027 budget — related to professional services and purchased services — we’re talking about another $227 million.”

“With that, we end up with a positive balance of about $5 or $6 million,” he added.

Regarding potential agency consolidations and reductions in government leases, Rivera Berríos noted that the $227 million figure also includes adjustments such as relocating agencies to shared buildings.

“That reduction in leases is already included in the 2027 budget,” he said.

The hearing was held before the House Finance Committee, chaired by Rep. Eddie Charbonier Chinea, as part of the evaluation of House Bill 1014. The measure seeks to amend multiple sections of Puerto Rico’s 2011 Internal Revenue Code to reduce the tax burden on island taxpayers. The session also included participation from Treasury Secretary Ángel Pantoja Rodríguez, the OMB, and the Puerto Rico Fiscal Agency and Financial Advisory Authority, which contributed to the fiscal and budgetary analysis of the proposal.

The proposed tax reform has yet to obtain the approval of the Financial Oversight and Management Board, which has also weighed in, emphasizing the need for a balanced approach:

“Puerto Rico needs a tax reform, but it must be fiscally responsible and aligned with the Fiscal Plan,” the entity stated. “The Oversight Board will continue working with the governor and the Legislature on responsible reforms to simplify Puerto Rico’s complex and burdensome tax code, while ensuring sufficient resources for the financial plan’s needs.”