Puerto Rico Senate to Impose Sales Tax

The Associated Press
Thursday, May 4, 2006; 1:19 PM

SAN JUAN, Puerto Rico -- Puerto Rico moved a step closer to resolving a partial government shutdown as the island's Senate voted Thursday to impose a sales tax of 5.9 percent and a new levy on large corporations.

The vote came on the fourth day of a shutdown that has closed Puerto Rico's public schools and put more than 90,000 government employees out of work. Puerto Rico has a deficit because the governor and legislature have been unable to agree on a budget for the past two years.

The 15-10 Senate vote had the support of opposition lawmakers who have resisted Gov. Anibal Acevedo Vila's proposed 7 percent sales tax, which he said was necessary to obtain a loan to pay government salaries for the remainder of the fiscal year ending June 30.

After the shutdown began Monday, Acevedo has said he would agree to a 5.9 percent tax but needed a proposal from the legislature. It wasn't immediately clear when the House of Representatives would take up the proposal. Puerto Rico currently has no sales tax.

House President Jose Aponte has said any sales tax must be approved as separate tax reform legislation and not as part of the loan repayment package.

A pro-independence senator, Maria de Lourdes Santiago, opposed the sales tax and predicted that the House would reject it. "The only thing that occurs to them are proposals to tax the working class," she said of the measure's supporters. "They want Puerto Rican families to pay."

The Senate measure also included a new tax on corporations with earnings of more than $10 million. Acevedo had previously said he would oppose that additional levy but agreed to support it amid public protests over the government shutdown.

Acevedo and the opposition-dominated legislature have mostly traded insults and accusations since the island's government ran out of money Monday, two months before the end of the fiscal year.

The shutdown forced the closure of 43 public agencies, prompting thousands of government workers to apply for public assistance and leaving 500,000 students with no classes two weeks before the end of the academic year.

Officials had warned that the shutdown could last until June 30 unless the governor and lawmakers agree on a way to repay a loan needed to make up for a $740 million budget shortfall.

© 2006 The Associated Press