Retail Trade Assn. rips hasty approval of inventory tax freeze in House

Says bill lacks key input for long-term solution, urges Senate to hold hearings

Retail Trade Association President José González

By The Star Staff

Retail Trade Association President José González voiced his profound disappointment and concern earlier this week following the recent approval of House Bill 420, which proposes a five-year freeze on the inventory tax.

“This measure fails to guarantee the eventual elimination of the inventory tax, leaving merchants and local businesses facing a period of prolonged uncertainty,” González said, emphasizing that while a freeze might sound beneficial, it falls short of providing any long-term solution. “Furthermore, it does not adequately address the significant inventory challenges that retailers experience, nor does it offer a framework that would genuinely benefit the people of Puerto Rico.”

The inventory tax is imposed on businesses for goods on inventory and is a source of revenue for financially ailing municipalities.

González criticized the bill for doing little more than postponing the fulfillment of commitments made by the current administration. He pointed out that stakeholders were promised a comprehensive proposal that would not only freeze the tax for five years but also identify alternative revenue sources for municipalities during that time frame, ultimately paving the way for a permanent elimination of the tax -- a crucial step that Puerto Rico desperately requires, he said.

The retail sector leader stressed how the passage of the bill in the House of Representatives occurred in a hurried manner, neglecting the public hearing process that had been promised by House Speaker Carlos “Johnny” Méndez Núñez and Finance Committee Chairman Eddie Charbonier Chinea.

“It is particularly disheartening that, after being informed about forthcoming public hearings scheduled for April 9, those hearings were abruptly canceled last Friday afternoon,” González said. “Then, shockingly, the bill was fast-tracked through the legislative process on Monday without affording the public any opportunity for input or consideration of vital amendments that we had suggested.”

While he acknowledged that merchants were willing to accept a freeze on the inventory tax rate, he underscored that this acceptance hinged on the inclusion of a guarantee for the tax’s elimination within the five-year period.

“The drafting of this legislation did not accurately reflect the consensus we established in discussions with officials from La Fortaleza,” González said. “It is crucial for the legislation to contain a provision that ensures, during the freeze period, an alternative revenue source for municipalities is actively developed, and that the tax is ultimately eradicated. Without such stipulations, the bill risks becoming ineffective, bringing no benefit to anyone -- whether that be the financial stability of municipalities, the commercial sector, or the citizens of Puerto Rico.”

He urged Senate President Thomas Rivera Schatz to promptly schedule public hearings once the measure reaches the Senate.

“The private sector remains hopeful that the Senate president will give us the opportunity to present our viewpoints,” González said. “It is imperative that the solution to this tax issue provides genuine relief, ensuring a balance is struck so that the remedy does not prove to be more detrimental than the problem itself.”

When asked later on Tuesday about the objections raised by retail organizations and some mayors from the New Progressive Party to the inventory tax freeze, Gov. Jenniffer González Colón insisted that the elimination of the tax cannot be included in the bill because there is currently no alternative source of revenue.

“This is a programmatic commitment,” she said. “This is the government platform we promised the people of Puerto Rico, and we all agreed, saying it would be approved in these first six months of government, that it would be frozen for the next five years, and that we would find a way to identify the funds to eliminate them. We are fulfilling the five-year freeze.”

“There are people who want to impose their criteria, and of course I want to eliminate it, but the promise we made to the people was to freeze and evaluate how to eliminate it,” the governor added. “I can’t implement it if I don’t have the sources for how we’re going to replace it. That’s why the language speaks of a five-year freeze, which is the programmatic commitment included in the platform. The goal must be for us to be able to identify how we’re going to return that money to the municipalities. When we have that study and can identify it, then we eliminate it. I can’t do it any other way.”