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Puerto Rico Restaurants Association holds gubernatorial candidate forum

October 6, 2020 | María Soledad Dávila Calero

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Pols discuss food production, sales tax, permitting and more

SAN JUAN — The Puerto Rico Restaurants Association (Asore by its Spanish acronym) held a forum with five of the six gubernatorial candidates to discuss such topics as taxes, management of the pandemic and the permitting structure.

While they offered different proposals on how to address the issues, Pedro Pierluisi of the governing New Progressive Party (NPP), Juan Dalmau of the Puerto Rican Independence Party (PIP), Alexandra Lúgaro of the Movimiento Victoria Ciudadana (MVC, or Citizens’ Victory Movement), César Vázquez of Proyecto Dignidad (PD, or Project Dignity), and independent candidate Eliezer Molina, all concurred in what they called an urgent need for Puerto Rico to increase local production in general to not depend as much on imports.

Likewise, all candidates argued that a key element to increase production and grow the economy is to improve the island’s electric power service and the use of renewable sources.

Regarding taxes, all the candidates said they backed a repeal of the tax on inventories, but diverged in the broader discussion on Treasury revenue. Pierluisi and Vázquez argue that the economic conditions do not allow for the elimination of the sales and use tax (SUT, or IVU by its Spanish acronym) on prepared meals, while Lúgaro and Dalmau argued otherwise.

“Although it would be ideal to be able to eliminate the SUT on prepared food, the island’s fiscal situation continues to be precarious and I am not the person to promise things that I cannot fulfill. My preference would be to reduce the SUT on everything, but first we have to stabilize our economy, advance the restructuring of government debt and promote economic growth that allows us” to drop the sales tax, Pierluisi said.

The NPP candidate defended his stance by arguing that, ultimately, what businesses, including restaurants, need is for the costs of doing business in Puerto Rico to be reduced, and said he would reform the tax code to lower individual and corporate tax rates.

For their part, Dalmau and Lúgaro argued that food, uncooked and at restaurants should not be subject to a regressive tax and that the focus should be on progressive taxes.

Dalmau stressed that his flat 10 percent corporate tax would create better conditions for business and that the way to achieve a better operating environment does not necessarily entail lowering the tax rate but rather proving to businesses that their fiscal contribution is invested in needed services and produces tangible benefits. As an example, he mentioned the pharmaceutical company Roche, which recently announced it would be relocating its operations to the U.S. mainland and to Germany, where there is a higher tax rate than Puerto Rico.

Another issue discussed in the Asore forum, which was moderated by journalist Ada Torres Toro, was the minimum wage. Pierluisi and Dalmau believe it needs to be raised, with Pierluisi suggesting that Congress is likely to increase the federal minimum, and both proposing subsidies to offset the impact on small and medium-sized businesses.

Dalmau said he wants “to establish an economic development fund and use part of that economic development fund to subsidize, once the minimum wage is increased, in accordance with the economic realities of each business,” the requirement for that wage. “Why is the minimum wage important to me and that it not affect the business by adding that subsidy from the government? Because to the extent that more Puerto Ricans have more money in their pockets to purchase products and services, the more money they will have to consume in restaurants, in entertainment, in the consumption of products and services.”

The MVC candidate espoused the need for a higher minimum wage but said it should be raised in stages, starting with businesses that can afford the increase, while others would do so as the economy grows.

As for permits, the consensus among the gubernatorial hopefuls was that the system is broken; however, their proposals differ.

Vázquez posited that there are too many permits that require frequent renewal and whose only purpose is to generate revenue for the government.

Pierluisi repeated his proposal of business self-certification and said Puerto Rico’s permitting regulations should be similar to certain states, such as Florida, to be able to compete with stateside jurisdictions. The PIP candidate argued that permitting should be streamlined for most cases with the exception of areas dealing with health care or environmental impact.

Lúgaro, who described the permitting system on the island as rusted, assured that what must take place is the elimination of opportunities for certain people who benefit from the broken system.

“We come to put an end to the institutional mafia that corrodes the agencies to discourage the existence of efficient permitting systems. To the extent that there is a black market to obtain permits of all kinds, the efficient systems are not promoted. To the extent that you can pay a facilitator $3,000 to $6,000, and in a week you have a use permit or an alcoholic beverage permit or a rezoning of a zone … as long as that can continue to occur and creates a profit market for some, most of the country is affected by these systems,” the MVC candidate stressed.

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