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  • Writer's pictureThe San Juan Daily Star

Oversight board: Tax incentives for providers in medical emergencies violate Fiscal Plan

The oversight board said the cost estimate in Joint Resolution 30 is incomplete because it does not anticipate “the loopholes in the measure that will likely increase its adverse impact on revenues,” and the proposed incentives will cost the government $16 million a year “without offsetting lost revenues.”

By The Star Staff

The Financial Oversight and Management Board on Thursday informed the island government that it failed to submit adequate cost estimates for a measure that would grant incentives to medical specialists or subspecialists to address medical emergencies in public health centers.

In a letter dated July 27 to the Fiscal Agency and Financial Advisory Authority (AAFAF by its Spanish initials), the oversight board said Joint Resolution (JR) 30-2021, which orders the Economic Development and Commerce (DDEC) and Health secretaries to establish an emergency exception mechanism in accordance with the Puerto Rico Tax Incentives Code to grant the incentives, violates the Fiscal Plan.

Pursuant to JR 30, the DDEC and Health secretaries would have the authority to certify the existence of medical emergencies — as determined by a shortage of physicians in certain medical specialties and subspecialties — and the eligibility of medical professionals who meet the requirements provided by JR 30 and who seek to avail themselves of the tax incentives available through the resolution.

The AAFAF said that despite decreasing revenues by $16 million, JR 30 is “not significantly inconsistent” with the Fiscal Plan.

The oversight board said the cost estimate in the JR 30 submission is incomplete because the estimate does not anticipate “the loopholes in the measure that will likely increase its adverse impact on revenues and JR 30 will cost the Government $16 million annually without offsetting lost revenues.”

“Further, JR 30 and Act 60 add to the [tax] system’s complexity and further erode the tax base” in violation of the Fiscal Plan by not limiting the DDEC secretary’s discretion in awarding incentives and not placing annual limits “on the aggregate scale of incentives that can be offered each year,” the board said.

Accordingly, the oversight board said cost estimates were deficient and in violation of the fiscal plan.

JR 30 reduces revenues, and the government may not reprogram funds without prior review and approval by the oversight board, the federal entity said. Ultimately, any tax decree revenue loss will be reflected in budgetary allocations, either in the budgets of the agencies most closely associated with the decrees or in the operating budget of the Legislature, given that it has made the policy choice that such reduction in tax revenue without corresponding offsets is in the best interest of the commonwealth.

Meanwhile, the oversight board ordered the government to provide by Aug. 12 the number of decrees provided under JR 30 and whether any were submitted under Act 60 tax incentives law.

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