Wal-Mart blasts Puerto Rico tax ahead of trial
By Nick Brown
SAN JUAN Feb 1 (Reuters) - Wal-Mart's Puerto Rico subsidiary on Monday said a U.S. commonwealth tax on big companies is discriminatory, setting the stage for a trial starting on Tuesday that could threaten a tax increase Puerto Rico hoped would protect local businesses and jump-start its economy.
In court papers filed ahead of the trial, in U.S. District Court in San Juan, Wal-Mart said "it is the only taxpayer" on the island subject to a tax hike enforced on goods purchased by big companies from corporate affiliates outside of Puerto Rico.
"Wal-Mart PR was itself specifically targeted for discrimination," the company said, claiming it was taxed at 114 percent of net taxable income.
Wal-Mart sued Puerto Rico Treasury Secretary Juan Zaragoza-Gomez in December, alleging the increase, which was signed into law on May 29 last year, violated the commerce clause of the U.S. constitution by unfairly taxing interstate commerce.
The law increased the tax for on-island companies with more than $2.75 billion in revenues that buy goods from off-island "related parties" to 6.5 percent from 2 percent.
Wal-Mart says it is the only company that fits into the new tax's highest bracket, effectively taxed on items from its own distribution centers, but not those bought from Puerto Rican vendors.
In separate court papers on Monday, Zaragoza-Gomez said the tax is designed to protect against "'leakage' of income outside of the Commonwealth's taxing jurisdiction." He argued that the case does not belong in federal court to begin with, saying tax disputes are meant to be adjudicated at the state level.
Puerto Rico is in economic crisis, facing $70 billion in debt, a 45 percent poverty rate and a shrinking population as residents leave for the mainland United States. The island is trying to sway bondholders on steep cuts to repayments, but faces resistance from creditors who feel it has not been transparent about its finances. Continuación...