Francisco Parés Alicea

Treasury Secretary Francisco Parés Alicea

Puerto Rico Treasury Secretary Francisco Parés Alicea reported that the General Fund's net revenues throughout February 2021, the eighth month of the current fiscal year, totaled $714.8 million.

The official added that collections accumulated to February totaled $6,747.8 million ($6.7 billion) or $122.5 million more, compared to the same period in fiscal year 2020, when collections reached $6,625.4 million ($6.6 billion). This represents an increase of 1.8 percent between the two periods.

"We continue to observe since last November and in a consistent way, how the collections of this fiscal year continue to exceed month by month the numbers of fiscal year 2020," he stated.

The collections for February surpassed the fiscal forecast by $110.4 million, or 5 percent.

"Regarding the accumulated fiscal period from July to February, the collections are $1,082.3 million over the fiscal estimate, or 21.2 percent. That said, we must mention that both the Financial Oversight [and Management] Board (FOMB) and the Fiscal agency and Financial Advisory Authority (AAFAF by its Spanish acronym), are in the process of reviewing their Fiscal Plan. The [FOMB], specifically, will present its revised version on April 23, which will represent changes to the projection of the current fiscal period and the short and medium-term projections," Parés said.

Net income for February reached the figure of $714.8 million, while collections during the same period in 2020 totaled $670.8 million. The main tax lines responsible for this increase have been taxes on consumption, such as the Sales & Use Tax (IVU, Spanish acronym), motor vehicle taxes, federal refund on taxes on shipments of rum and taxes on alcoholic beverages.

"Regarding the income tax, collections in February show mixed signals. The corporate and corporate sectors exceeded the February 2020 collections by $4.6 million and $4.8 million, respectively," the secretary said.

He explained that individual income, which since November had presented an increase in behavior compared to last year, did not reach the figures of February 2020. However, when evaluating the performance of the collections of individuals for the accumulated period, they exceed by $68.7 million collected during the same period in 2020 or 5.3 percent.

In the tax line of corporate income in February, the collections with respect to the previous fiscal period were exceeded for the second time in the year by $4.6 million. During the period accumulated to February, the collections of fiscal year 2020 exceeded by $606.5 million or 33.3 percent those of the present year.

However, of the total of $1,212.6 million ($1.2 billion) accumulated as of February in fiscal 2021, $211 million belong to deferred payments for the pandemic pertaining to fiscal year 2020. While during the accumulated period of 2020 there are $488 million of non-recurring income. When making the corresponding adjustments, what was collected in February in this fiscal year is $329.5 million lower than in fiscal year 2020 or 24.8 percent less.

Regarding the main lines of taxes, which are alcoholic beverages, cigarettes, motor vehicles and other taxes, during the accumulated period from July to February they showed positive balances and growth compared to the same period of the previous year, of 2.1 percent, 22.9 percent, 27.2 percent and 56.3 3 percent, respectively.

Among these, other taxes and motor vehicle taxes stand out, which has consistently exceeded the monthly collections of the previous fiscal year, which as of February represented $83.9 million more.

The total number of units subject to motor vehicle tax amounted to 98,159, which compared to the same 8-month period in fiscal year 2020, represented an additional 34 percent. It was during the month of December when the highest number of units was reported, a total of 19,014.

Another tax line that reflected a significant increase compared to fiscal year 2020 is the “Other General Fund income." This includes sub-categories of income among which are: interest, dividends, property taxes, licenses, miscellaneous income, partnerships and other taxes.

Of these subcategories, the collections of other taxes and companies stand out. The latter exceeded by $230.6 million what was collected during the fiscal period accumulated to February 2020. The increase in this line is associated with changes in the law that granted the alternative option of contribution to these entities. In this way, the company assumes the responsibility that would otherwise fall on the partner members of the entity.

Regarding "other taxes," the amount collected during this fiscal period accumulated to February, exceeded the collections for the same period by $91 million, or 59 percent more.

"Regarding the arbitration of foreign entities under Act 154-2010, the amount collected in February exceeded the amount collected last fiscal year by $4.1 million. This sector reflects a lag with respect to the behavior of fiscal year 2020 of $ 81.0 million or less 8.0 percent. As we previously highlighted, we have seen how the initial gap that existed in July, of $161 million between both fiscal periods, has been reduced, observing from September how the monthly income in this fiscal year has consistently exceeded the monthly collections of the fiscal year 2020," Parés said.

Moreover, in February, IVU collections exceeded February 2020 revenues by $53.5 million or 30.8 percent. So far this year, the performance of this tax has represented $ 308.4 million more to the General Fund than what was received in fiscal year 2020 or 26.7 percent more. The IVU collections have been boosted by fund transfers to individuals and businesses, which is also associated with the growth experienced by the other lines that pay taxes on consumption.

The effect of the pandemic and the restriction on the operation of shops was not neutral between the different segments of shops that make up the universe of merchants of the IVU.

Parés underscored that during the period from October to December of the reduced rate of 7 percent for qualified food service businesses, the average sales was $277 million per month. This was reduced to $119 million per month on average during the period from January to June 2020, which represented a reduction of 57.1 percent.

"When comparing the initial average of $277 million, when the rate reduction is implemented, with the average of $250 million per month that sales represented during the months of July to February, it is observed how this sector has gradually recovered, representing a reduction of 9.7 percent compared to the initial period from October to December 2020," he stated.

Parés —who is also the Chief Financial Officer of Puerto Rico— said he is focused on several goals, such as the orientation to taxpayers on additional benefits in the payroll for this 2020 tax cycle, among which are find, an additional 3 percent in tax rates, the opportunity to claim federal incentives of $1,200 and 600, the American Opportunity Credit, authorized for retroactive claim from 2018 to 2020 and the Work Credit.

"Our commitment is to comply with the speed that has characterized us and to continue focusing our efforts on directing our finances to take them to the 21st century. We must regain the confidence of citizens in their government and we are doing it, so that they can see again in Puerto Rico an ideal place to live," Parés said.

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