LA VERDAD SOBRE EL NARCOTRÁFICO EN PUERTO RICO - Querían aprovecharlo en vez de eliminarlo

Summary

The transcript discusses the complex economic situation in Puerto Rico, highlighting the underground economy and the role of the narcotics trade. It delves into the political strategies around taxation, including the sales tax (IBU) and its impact on the economy. The conversation critiques past political decisions, such as the implementation of a 10% VAT, and the challenges of addressing the high cost of living and doing business in Puerto Rico. It also touches on the issue of public pensions and their funding, emphasizing the constraints imposed by federal rulings and the difficulty of reducing taxes without the consent of creditors.

Takeaways

• 🇵🇷 Puerto Rico's underground economy, particularly the drug trade, was once considered the third-largest industry, after industrial and pharmaceutical sectors, and before tourism, contributing significantly to the island's GDP.
• 💼 Pedro Rosselló proposed a tax on consumption to address the excessive underground economy, which was a politically controversial but economically sound move.
• 📉 There was an issue with excessive consumption and high taxes on income, which penalized workers and promoted off-the-books employment, leading to a large informal economy.
• 🔄 Pedro Rosselló's idea to change the tax system was supported by Alejandro García Padilla, who also proposed increasing the consumption tax to eliminate payroll taxes completely.
• 🎯 The implementation of the Value Added Tax (IVA) was met with political maneuvering and ended up being set at 11.5%, with a municipal tax of 1.5%, making it one of the highest in the nation.
• 🚫 The political party PNP has historically been against high consumption taxes but has also been part of the process that led to their establishment and pignoration (lien) to debt repayments.
• 💡 The idea of reducing or eliminating the sales tax (IB) without a clear plan to replace the revenue is considered populist and unfeasible due to the island's financial obligations.
• 📉 The economy of Puerto Rico has been negatively impacted by high taxes, including the sales tax, which has led to a decrease in the standard of living compared to the past.
• 🛂 The pignoration of taxes like the IB to debt repayments means that any changes to the tax rates require approval from federal courts and creditors, limiting the government's ability to make adjustments.
• 🏭 The underground economy is not only due to illegal activities like drug trafficking but also includes a large number of people working informally to avoid losing government assistance.
• 📈 The government's approach to taxation has historically been reactive, based on the political party in power at the time, rather than being based on long-term economic development strategies.

Q & A

What was the underground economy in Puerto Rico like according to the transcript?

The transcript describes the underground economy in Puerto Rico as 'bestial', indicating it was extremely large and problematic, with the drug trade being considered the third-largest industry after industrial and pharmaceutical sectors and tourism.

Why was there a proposal to implement a consumption tax in Puerto Rico?

The proposal for a consumption tax, or a 'sales tax', was due to the massive scale of the underground economy, particularly the drug trade, which significantly contributed to the Gross National Product (GNP) of Puerto Rico.

What political strategy did Pedro Rosselló propose regarding the economy?

Pedro Rosselló proposed a tax on consumption as a political strategy to address the excessive consumption and high taxes on income, which penalized workers and encouraged off-the-books employment.

What was the issue with the excessive consumption and high taxes on income in Puerto Rico?

The issue was that it punished workers by taxing their income heavily while promoting consumption, which in turn encouraged people to work off-the-books to avoid taxes and maintain eligibility for certain benefits.

What was the political outcome of Pedro Rosselló's proposal?

Pedro Rosselló's proposal was controversial and, while it was seen as a correct move by some, it also led to political backlash. Despite this, it was implemented and contributed to his political victory.

What was the role of Carmen Yulín and Luis Vegas Ramos in the political scenario mentioned?

Carmen Yulín and Luis Vegas Ramos were part of a group that sought to oust the governor, with the intention of having David Bernier or Julián take over, which was a strategic move to advance their political interests.

Why was the IVA (Value Added Tax) proposed to be at 10% and then ended up being 7%?

The IVA was initially proposed to be 10%, but due to legislative errors and political negotiations, it ended up being set at 7%, including the municipal tax.

What is the current situation with the IVA (Value Added Tax) in Puerto Rico?

The current IVA rate in Puerto Rico is 11.5%, which includes the municipal tax. It has been criticized for its high rate and the inability to reduce it without federal court approval due to debt obligations.

What is the significance of the 'ley promesa' (Promise to Pay Law) in Puerto Rico's economy?

The 'ley promesa' or the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) is significant as it established a federal control board to oversee the island's finances and debt restructuring, impacting the ability to change tax rates like the IVA.

How does the transcript discuss the issue of the underground economy in relation to taxation?

The transcript discusses that the underground economy, both legal and illegal, is so large in Puerto Rico that it affects tax collection. It mentions that capturing all the supposed tax revenue from this economy could have significantly increased the island's revenue.

What is the implication of the high IVA rate on the cost of living and business in Puerto Rico?

The high IVA rate contributes to the increased cost of living and doing business in Puerto Rico, making it less competitive and placing a heavier economic burden on residents and businesses.