Puerto Rico’s ‘Wal-Mart Tax’ Ruled Unconstitutional

In ruling Puerto Rico’s Wal-Mart tax unconstitutional, the federal judge in San Juan noted that “the Commonwealth should not rely on revenue that it’s not entitled to.”

 

A federal judge has ruled that a law enacted by Puerto Rico’s government to charge Wal-Mart more than three times the rate it charges other companies is patently unconstitutional. Wal-Mart is the only company on the island with revenues anywhere close to the $2.75 billion level to which the law applies.

While Governor Garcia Padilla suggested the decision took $100 million away from the people of Puerto Rico and gave it to Wal-Mart, the decision had the exact opposite effect—a ruling against Wal-Mart would have done far more damage to Puerto Rico and Puerto Ricans.

Wal-Mart operates 48 stores across Puerto Rico, employs about 14,300 people (second only to the Puerto Rican government), pays its workers a minimum of $10 per hour—well above both the minimum ($7.25 an hour) and median ($9.42 an hour) wages in Puerto Rico—purchases about $1.6 billion worth of products from local vendors and suppliers, and currently pays about $40 million in income taxes to the Puerto Rican government.

Losing Wal-Mart would be a devastating blow to the struggling Puerto Rican economy—much more so than the alleged $100 million in lost tax revenues. But that’s precisely what the tax would do—drive the retailer off the island.

 According to Wal-Mart officials, the tax would have resulted in an effective tax rate of 91.5 percent of net income, with the company paying 114 percent of its island profits in taxes.
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Source: Puerto Rico’s ‘Wal-Mart Tax’ Ruled Unconstitutional