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After confirming that his agency’s stance aligns with that of the Financial Oversight and Management Board, Reinaldo Paniagua Latimer, the executive director of the Municipal Revenue Collections Center (CRIM by its acronym in Spanish), stated on Wednesday that the government should not repeal the inventory tax but should instead replace it with another source of revenue.
Paniagua emphasized that while pursuing economic development for the island is important, it should not come at the expense of municipalities facing bankruptcy. The government aims to repeal the inventory tax, which is a significant source of revenue for the island’s 78 municipalities, most of which are in a precarious fiscal situation.
The head of CRIM supports a proposal to freeze the inventory tax for five years, asserting that this period will allow enough time to evaluate alternative sources of income for the municipalities.
“I want to clarify that I’m speaking as someone who defends the municipal structure,” Paniagua said. “We have never suggested eliminating the tax; rather, we advocate for its replacement, and that remains our approach.”
While Paniagua acknowledged the arguments from the Puerto Rican business sector in favor of repealing the tax, he does not agree with all the reasons they have provided for its elimination.
“We believe in promoting economic development, but not at the cost of bankrupting municipalities,” he said. “I believe that this proposal is a first step in the right direction, and we have much work ahead to identify alternatives. Various proposals have been presented, and we must analyze them and submit these options to the legislative assembly, the governor, and the oversight board to address the potential loss of these funds.”
Last week, the CRIM reported that the fiscal situation of the municipalities of Arroyo, Ciales and Maunabo may worsen starting this March due to a projected decrease in income.
“Our projections indicate that these three municipalities could experience a reduction in remittances and available cash beginning in March,” the CRIM stated. “They are already using all their available funds to pay off debts, and if the current situation persists, we anticipate that the number of municipalities affected could rise to seven. After Arroyo, Ciales, and Maunabo, Patillas will also be impacted. Our goal is to address these issues proactively.”
