Thursday, July 30, 2015

In spite of all this, some in Washington are listening to the people of Puerto Rico

We are not surprised at the humongous costly lobbying effort from Puerto Rico and K Street to protect the CFC Regime IRS Tax Evasion scheme which generates billions of dollars IRS tax free by using Puerto Rico as a foreign tax haven for the benefit of the very few in Puerto Rico and the US. 

BUT.... THIS OFFSHORE TAX EVASION SCAM IS THE MAIN REASON FOR OUR SORRY ECONOMIC CRISIS! That is why one million US Citizens have abandoned the island. 

We are sad about Puerto Rico, but pleased that at least our meager efforts to inform Washington and the world of how this tax evasion has not helped Puerto Rico has been listened to by some in Congress and the US. 

Our fellow citizens in the 50 states and Congress can confirm that our arguments were true; that the special "foreign" tax codes for Puerto Rico to benefit CFC's and Law 22 for IRS Tax Evasion purposes, has not worked for Puerto Rico. The media write that Puerto Rico has plunged into a spiral economic downfall and everyone is scurrying to to see what to do. The answer is easy... we need to incorporate into the economic model of the 50 states!

But, our problem is that most of the main official players are the most powerful lobbyists and powerful political figures from Puerto Rico who benefit from this shady foreign US Territorial tax scam, and the people of Puerto Rico are not represented. The wrong guys have the power and resources to win this fight
Miriam Ramirez 
@mjean2
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U.S., commonwealth tax proposals threaten manufacturing jobs
By : REYNALDO MISLA
reynaldo@casiano.com cbprdigital@gmail.com
Edition: July 30, 2015
Volume: 43 | No: 29

International tax reform to be tackled by Congress before year’s end

Just as was the case in the early 1990s, Puerto Rico's manufacturing sector is once again being threatened by U.S. and commonwealth tax proposals. While the Obama administration has proposed a new mandatory global minimum tax of 19% on controlled foreign corporations' (CFCs) income, the Krueger Report prepared for the García Padilla administration has raised the possibility of increasing the current 4% excise tax on CFCs through Act 154. Unless Congress and the commonwealth government can be persuaded about the ill effects of such policies on a sector that, while diminished from its peak, remains the bedrock of Puerto Rico's economy, the continued existence of thousands of high-paying jobs is far from assured.

Since last October, Puerto Rico Manufacturers Association (PRMA) President Carlos Rivera Vélez has been meeting with key members in both houses of Congress. His message is that a sizable number of manufacturing jobs held by U.S. citizens would be at risk with the approval of such a proposal. To that effect, the PRMA believes that within the framework of any new tax treatment involving CFCs, those employing U.S. citizens in U.S. territories should be given a "significant competitive differential" over CFCs operating in foreign countries and employing foreign citizens.

"We need to work with the U.S. to create jobs," Rivera Vélez told CARIBBEAN BUSINESS in an exclusive interview. "The fact that these tax policies, like Section 936, depend on Puerto Rico being treated as a foreign jurisdiction is unsustainable," Rivera Vélez said. Ultimately, we need an economy with bigger and stronger local-capital enterprises, he added.

The PRMA is asking Congress to spare the island's CFCs, which dominate local manufacturing for the time being, but also to create strategies for the development of local-capital industries.

In the last Congress, Rep. Charles Boustany (R-La.) introduced the Manufacturing Innovation in America Act. Under Boustany's proposal, taxpayers would have had the option to exclude from taxation up to 71% of their patent profits for the year under a statutory formula that took their research and development expenses, and the extent to which their products are developed and commercialized in the U.S., into account. The PRMA has asked Boustany to include Puerto Rico in his proposal.

Indeed, the PRMA is aiming to bring to the forefront the island's economic interests, not just in the context of international tax reform but as part of the growing movement to bring manufacturing investment back to the U.S. from abroad. In his visits to Congress, Rivera Vélez has seen empathy and a desire to learn about Puerto Rico's situation firsthand. "We understand the visits are having an effect," Rivera Vélez said.

While any concrete commitments from Congress or the Obama administration have yet to materialize, the Senate Finance Committee's International Tax Working Group has recognized Puerto Rico's historical tax treatment as well as the importance of manufacturing to its economy.

For the next stage of its advocacy efforts, the PRMA has recruited other private-sector associations to constitute a united collaborative effort for its support message before Congress. "The next trip will be in September, with other leaders of the private sector," Rivera Vélez announced. In addition, former Resident Commissioner and Economic Development Administrator Antonio "Tito" J. Colorado might be recruited by the PRMA to assist in its lobbying efforts, Rivera Vélez said.

According to CARIBBEAN BUSINESS sources, international tax reform with an impact on CFCs is the most likely area for action before the end of 2015. The search for Federal Highway Program funding is one of the factors driving potential changes to the taxation of CFC income. Ways & Means Committee Chair Paul Ryan's (R-Wis.) goal is to enact international tax reform, as well as highway funding, before Dec. 18 of this year. The Senate Finance Committee has a similar goal.

Complicating matters is the Internal Revenue Service's (IRS) treatment of Act 154's 4% excise tax on manufacturers operating locally as a foreign tax credit CFC. U.S. Senate Finance Committee Chairman Orrin Hatch (R-Utah) has asked U.S. Treasury Secretary Jacob Lew for the Obama administration's take on various Puerto Rico-related issues. Among Hatch's long list of inquiries, he asks if the administration intends to apply its proposed minimum tax on foreign income on controlled foreign corporations operating in Puerto Rico, in the same way it would apply to CFCs operating elsewhere, and when will the U.S. Treasury finish its review to determine the creditability of the Act 154 excise tax. Hatch has given Treasury a July 31 deadline to respond.

Since its enactment by the Fortuño administration, the 4% excise tax has been treated temporarily by the IRS as though it is eligible for the foreign tax credit. The IRS has stated that the final "determination of the creditability of the excise tax requires the resolution of a number of legal and factual issues." Until now, the IRS hasn't challenged the creditability of the excise tax. Furthermore, the IRS has said that if it eventually decides the excise tax isn't creditable, such a determination would only apply on a forward-going basis.

The PRMA believes the commonwealth's changing tax rules have cost Puerto Rico dearly in terms of investment from manufacturers abroad. The sudden approval of Act 154, its renewal as it was about to expire, and recent talks about raising the excise tax from 4% to 10% have affected the perception of Puerto Rico's stability as a manufacturing investment destination.

"We are playing with fire," Rivera Vélez warned. "Everyone is paying attention to what's happening."

Wednesday, July 29, 2015

Children, the elderly, and middle class pay the highest price for bad administrations and rampant corruption for decades in Puerto Rico

(ECONOMISTAS RECOMIENDAN BOTAR LOS MAESTROS DE PUERTO RICO PARA  AHORRAR DINERO!)
mj
Hedge Fund Economists Want Puerto Rico to Lay Off Teachers to Fix Debt Crisis
by Jack Linshi @jacklinshi , July 28, 2015

The island is $72 billion in debt
Puerto Rico can avoid a costly default by upping taxes, cutting teacher jobs and closing schools, a group of hedge fund economists proposed in a report released on Monday, offering a controversial solution to the island’s“unpayable” $72 billion debt crisis.
Image result for free art clip of teacher and studentsThe report, commissioned by hedge funds holding several billion dollars of Puerto Rico’s bonds, highlights the island’s rising education expenditures against the backdrop of countless school closings and waves of poor families fleeing to mainland America.
MORE:
Economists Want PR To Lay Off Teachers

Sunday, July 26, 2015

A TROPICAL PARADISE FOR THE RICH, A SINKHOLE FOR THE POOR

THE GUARDIAN
Puerto Rico debt crisis: austerity for residents, but tax breaks for hedge funds
July 24, 2015
by Alan Yuhas
"The Caribbean territory has courted some of Wall Street’s richest citizens, selling its debt and offering inducements while local people face high taxes and cuts"

Caught between the demands of billionaires, pro-bankruptcy activists and more than three million people plagued by unemployment, poverty and government debt, who would you choose? As Puerto Rico confronts the quagmire of its $72bn financial crisis, it has come up with an answer: humouring a few very wealthy people.

The island has for three years courted some of Wall Street’s richest citizens, from solitary investors to hedge fund elites. Last year it sold at auction hundreds of millions of its debt to various funds, displeasing many who believe the “vulture funds” only want a quick profit off Puerto Rico as it desperately tries to repay debt with high local taxes and austerity cuts.

Hedge fund manager John Paulson, best known for making billions off the 2008 subprime loan market crash, led the charge last year when he declared the island“the Singapore of the Caribbean”. His fund bought more than $100m of Puerto Rico’s junk-rated bonds last year.

MORE: http://www.theguardian.com/world/2015/jul/25/puerto-rico-debt-crisis-billionaires-hedge-funds-good-news

Saturday, July 25, 2015

MICROSOFT vs IRS UPDATE

'MICROSOFT'S EVIDENTIARY HEARING AGAINST IRS. The evidentiary hearing where Microsoft plans to present evidence that the IRS violated the court's rules by including a private law firm in its interrogations of the tech giant's employees is back in motion. If you're going "Wait, didn't this already happen?" remember the hearing was originally scheduled for July 21 but then both parties decided to reschedule. 

The hearing centers on the IRS's investigation of Microsoft for past transfer pricing activities, and its hiring of the outside law firm Quinn Emanuel to help with its audit. Microsoft thinks it's incredibly suspicious that around the time the agency entered into the contract, it passed temporary regulations allowing contractors to participate in the summoning process, and then shortly afterward summoned top current and former Microsoft executives, including former CEO Steve Ballmer.

The IRS has been cracking down harder on multinational tech companies for transfer pricing lately because there's a lot at stake. In 2009, the IRS took the software manufacturer to court for transfer pricing and lost. That decision gave the IRS the short end of the stick in negotiation discussions with tech giants because the companies knew if they went to court, the precedent was that the tech companies could beat the IRS. The IRS is trying to change this by pushing for less redactions of court transcripts and bringing in the private law firm so it will have the upper hand in negotiations and in the appeals court.

- WHAT TO EXPECT: Microsoft attorneys Daniel Rosen and James O'Brien of Baker & McKenzie got the OK to take the stand, so anticipate testimony from them. Other than that, Microsoft just has to present enough circumstantial evidence to infer the IRS involving Quinn Emanuel in interrogations of taxpayers violated the court's rules.v