Bogus Claims of Default?
“We’ve proven Puerto Rico is NOT Detroit nor Greece.”
Governor Alejandro Padilla, April 2014 (after selling $3.5B bonds to investors)
A funny thing happened along the way to default, Puerto Ricans started to actually pay their taxes. By some estimates, up to 35% of the countries’ GDP is underground, not accessible to tax collection. Recent data shows this may be starting to change.
Government of Puerto Rico revenue for 11 months of Fiscal Year 2016 totals $14.9 million more than estimated in the budget, according to figures released yesterday by Treasury Secretary Juan Zaragoza, calling into question claims that Puerto Rico cannot pay its debts.
U.S. Treasury Caught Speeding?
The U.S. Treasury has been painting a dire picture for Puerto Rico. In an effort to cram down investors, achieve debt forgiveness from bond holders, most investors feel the Treasuries’ recent claims have been unfounded.
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The territory has collected $8.2 billion, compared with $7.9 billion during the same period of Fiscal Year 2015.
Puerto Rico
Debt vs. Population
2016: $72B vs 3.5m people
2006: $38B vs. 4.6m people
Bloomberg data
The major change in revenue was in the Sales and Use Tax, which was increased from 7% to 11.5% during the year. After payments on bonds issued by the Sales Tax Financing Corporation (COFINA), the levy contributed $1,355.8 billion into the treasury compared with $510.9 million last fiscal year. The amount was $27.1 million more than expected.
Individual income taxes were down from $2,106.2 billion to $1,854.3 billion, $10.4 million less than expected. Corporate income taxes edged lower from $1,478.2 billion to $1,434 billion, but were $53.6 million more than budgeted.
The 4% tax on products received by companies in the States from their manufacturing subsidiaries in Puerto Rico generated $1,675.7 billion, a bit less than the $1.741.1 billion last year and $24.8 million less than expected.
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