A tax passed last weekend in Puerto Rico is drawing fire from the medical device, pharmaceutical and biotech industries, which say the levy could harm innovation and the economy on the island.
Puerto Rico Gov. Luis G. Fortuño signed Law 154 into effect Oct. 25, creating a 4 percent tax on businesses domiciled off the Caribbean island, which is a U.S. commonwealth. The move prompted immediate responses from lobbying groups for healthcare-related industries, which have a significant presence in Puerto Rico.
“AdvaMed members are major employers in Puerto Rico, providing more than 15,000 jobs, or roughly 13 percent of the island’s manufacturing jobs,” wrote Stephen Ubl, president and CEO of the Advanced Medical Technology Assn. in a letter to Fortuño. “I am very concerned that this tax sends a very bad message to our members and will significantly impact device manufacturers’ ability to maintain and grow their manufacturing facilities on the island. The imposition of this tax will quickly erase all of the positive impressions of Puerto Rico that our members received last week as the Puerto Rico Industrial Development Co. exhibited at and helped sponsor the industry’s premier conference, AdvaMed2010.”
Not to be outdone, the Pharmaceutical Research and Manufacturers of America released a statement excoriating the new tax.
“Last year, America’s biopharmaceutical companies invested more than $65.3 billion into the research and development of innovative life-saving and life-enhancing new treatments. Many of those treatments were researched or manufactured within the Commonwealth,” according to the PhRMA statement. “Law 154 will dramatically hinder these companies’ positive efforts within Puerto Rico.”
And the Biotechnology Industry Organization said the tax endangers Puerto Rico’s record of being “a center of excellence in attracting foreign investment and venture capital from innovative bioscience companies and investors.”
“This new tax increase will profoundly affect the decision-making of foreign corporations as they consider whether to continue to do business and deploy their capital in Puerto Rico,” according to the BIO statement. “The bioscience industry has remained a bright spot through one of the worst economic recessions on record. This is particularly true in Puerto Rico, where the bioscience industry accounts for over five percent of the employment base, providing stable, high-paying jobs. Without a doubt, the bioscience industry is crucial to the economic health of Puerto Rico.”
The measure, set to take effect Jan. 1, levies a 4 percent tax in 2011. The rate falls to 3.75 percent in 2012, 2.75 percent in 2013, 2.5 percent in 2014, 2.25 in 2015 and 1 percent in 2016, after which it will lapse, according to Reuters.
