Tuesday, September 20, 2011

PUERTO RICO - THE KINGDOM OF CORPORATE WELFARE AND OFFSHORE TAX SHELTERS


Governor announces unified front to lobby for new federal tax incentive

(Celebrate the victory of the glorification of corporate welfare and and the officialdom of Puerto Rico as the perpetual offshore tax shelter colony in the Caribbean!
US worker...... forget about jobs, they are going to foreign countries.
American Tax Payers, .......prepare to pay more taxes to compensate this generous gift to the corporate welfare corporations.
Puerto Ricans, ........forget about statehood or independence. We are coded as a foreign country for these tax purposes... Just think of all this lobbying power in DC making sure PR remains as a foreign country ! 
And we would owe it all to our '"statehood leaders?")
MJ
By : JOHN MARINO

The public and private sectors, and officials from Puerto Rico’s two largest political parties, agreed Monday to work together to lobby for a new federal industrial lure for Puerto Rico.
While proponents have acknowledged potential resistance to the plan, they say there is also a “window of opportunity” for its passage — which would be the first federal support for industrial economic development since the Section 936 tax break was eliminated completely in 2006, following a 10-year phaseout.
The opportunity has been sparked by the dual U.S. government goals of cutting public spending and bringing huge deficits under control, while trying to create jobs and give a spark to the sluggish U.S. economy.
By providing a conduit for U.S. firms to be able to bring some $2 trillion in profits earned and held overseas back to the U.S. at preferential rates, the proposal would enable these trillions of dollars to circulate in the U.S. economy and not sit in other countries. The law being proposed would make Puerto the entry point to the U.S. for these profits.
The proposal is being made as a bipartisan “super committee” in Congress begins work on how to save $1.2 trillion in government spending over the next decade. Revenue, spending cuts and tax reform are all on the table, but the committee’s deadline is late November 2011, and failure to pass a plan will immediately kick in a fallback plan with across-the-board cuts to almost all federal programs that spread the pain between Republicans and Democrats.
President Obama has presented a jobs plan and a deficit reduction plan, and Republican leaders are calling for tax reform and further spending cuts.
“The measure takes private sector recommendations for a federal incentive to create jobs and attract new investment in Puerto Rico that has real possibilities of being considered favorably in Washington,” Gov. Luis Fortuño said at a La Fortaleza press conference announcing the plan.
Resident Commissioner Pedro Pierluisi said he would be filing the Puerto Rico Investment Promotion Act in Congress, which unlike previous plans, would amend Section 933 of the U.S. Tax Code, rather than Section 245 or Section 243.
As first reported by CARIBBEAN BUSINESS (CB, Sept. 1 & 8), the initiative seeks to make Puerto Rico a conduit for the federal government to lure back to U.S. shores an estimated $2 trillion in profits that stateside corporations are keeping overseas to avoid taxation, a move that could help pay down the federal government’s debt while stimulating the slow-growing national economy.
At the same time, it would restore Puerto Rico’s lost competitive strength, creating jobs and investment, while providing a means for the U.S. government to raise revenue without increasing tax rates, proponents said.
The Pierluisi plan would allow island corporations that earn at least 50% of their income locally to elect to be domestic firms that would be treated distinctly through Section 933 of the U.S. Tax Code.
These firms could elect to be treated as local residents currently are, with their Puerto Rico-sourced income excluded from federal taxation but with the ability to make dividend payments to related stateside entities at preferential tax rates. In addition, an elective company would be considered a domestic firm and would qualify for important business tax credits, such as for hiring disadvantaged workers or adopting clean-energy technology, that aren’t generally available to many island firms, most of which are organized as controlled foreign corporations, or CFCs.
Private Sector Coalition President Francisco Rodríguez Castro applauded the change, saying it was a strategic move aimed at getting a better reception in Washington
“The initiative will stimulate all the primary sectors in the island that create wealth and promote development, including manufacturing, tourism, agro-industries and others,” he said.
Local supporters say the proposal could earn more than $100 billion in tax revenue for the U.S. Treasury, just from the existing level of overseas profits. That money would create jobs and spark investment in the U.S. rather than sitting idle in an overseas bank.
“This bill is an effort to thread the needle — that is, to craft a federal tax incentive that would provide a meaningful boost to Puerto Rico’s economy, but also one that has a fighting chance of passage by the U.S. Congress in these challenging economic times,” Pierluisi said.
Both the Puerto Rico House and Senate will attempt to pass unanimous resolutions supporting the plan. Government officials lauded the participation of the private sector and said their involvement was essential in order to win passage.
Critics believe the plan will face an uphill battle to passage, noting that tax specialists in Congress and at the Treasury Department are against changing U.S. tax law to benefit firms in a single jurisdiction, noting it would open up the potential for abuse.
The proposal’s requirement that 50% of the firm’s assets must be in Puerto Rico should lower the opportunities for abuse, according to supporters, but critics contend Congress is far more likely to pass a corporate tax holiday, a more direct and immediate way for the federal government to tap into the $2 trillion in overseas profits.