Amazon - IVU

Unfortunately it's true. Another way for the local government to explote the people. Still, if you have Amazon Prime, a lot of articles are cheaper than locally.

I do have Prime and I intend to keep it.

To be fair, PR needs the tax income and officially, buyers  from anything online already should report this at Hacienda and pay the IVU.
Now, that this didn't work should not surprise anybody. 

I guess individual sellers on ebay will not have made an agreement with Hacienda and will continue to sell without sales tax.

I would not mind paying the IVU if the money was used correctly. Between the corruption and waist in the government plus the merchants that do not report the money back to hacienda, the common citizens are the ones being exploited.

True..
Now, it doesn't look like we have much of a choice when Amazon is is going to charge IVU (other than look for alternative online sources.)

Not really, some other merchants that ship to the island won't do the IVU. Probably ebay and wish won't charge the IVU. Or you can always have a friend or family ship it privately to you.

Tax and spend or should I say waste?

It seems like the goverment is hell bent to destroy what little is left of the  puerto rican economy,  I can't believe the restrictions on this island, don't they understand you cannot just tax tax tax your way out,  free trade, small business growth, Make it attractive for larger companies to come in, work  on the tourism business,  Build the economy and the tax revenue will follow.

Spencerazac wrote:

It seems like the goverment is hell bent to destroy what little is left of the  puerto rican economy,  I can't believe the restrictions on this island, don't they understand you cannot just tax tax tax your way out,  free trade, small business growth, Make it attractive for larger companies to come in, work  on the tourism business,  Build the economy and the tax revenue will follow.

Those that leave the island don't get to vote, those poor people who he woos with all the federal welfare / medicaid, do (Easy 45 to 50% of the voting population). If something goes wrong he blames the US government or FEMA or The Army Corp of Engineers or the lack of statehood. People are political fanatics in PR and never see past their nose.

One of the local papers did a poll about Amazon and IVU, about 54% of the people said it will stop ordering from Amazon and look for other sources that are not yet collecting IVU. With IVU it will still be a little cheaper to buy online still. But that is the point, to even out the field for local merchants.

Imagine PR as a state, 50% of the population pay no tax at all other than IVU, the other 50% will get the privilege of paying Federal tax, local tax, and IVU, great way to put it on the shoulder of the working class .

Merchants Who buy on Amazon are just going to  pass on the tax increase to the consumers making It just that more expensive.Gracias.

ReyP wrote:

One of the local papers did a poll about Amazon and IVU, about 54% of the people said it will stop ordering from Amazon and look for other sources that are not yet collecting IVU.

Can't say that I'm surprised.  Comes when the economically illiterate make tax policy.

There's an idea in economics frequently called the "Laffer Curve" (Laffer didn't invent it), which basically says that public revenues increase as tax rates increase only to a point, after which the higher tax rates create such strong disincentives that people stop working.  I've included a link to a Forbes article that describes it more fully, and with pictures!

In this case, PR's IVU seems to have reached the point that residents are willing to go to significant additional time and trouble (both are economic "costs") to avoid paying the tax.  That should indicate that the tax rate is beyond optimal.  If the IVU were, for example, 6%, I wouldn't want to go to the trouble to avoid it.  I'd simply pay it, buying local goods.  But at a rate almost twice that, it's worth it to shop online, where I avoid the tax but don't benefit the local economy.

I suspect that the underlying problem is collection of income taxes.  Because income taxes are so heavily skewed to relatively high earners, many residents at that level find it attractive to leave the island.  That is, income tax policy creates a "brain drain".  Now, relatively few remain to pay the income tax, so the only other way to generate significant public revenue is with an IVU.  But as noted above, at its current level the IVU works to depress the local economy while failing to generate income.

WarnerW wrote:

I suspect that the underlying problem is collection of income taxes.  Because income taxes are so heavily skewed to relatively high earners, many residents at that level find it attractive to leave the island.  That is, income tax policy creates a "brain drain".  Now, relatively few remain to pay the income tax, so the only other way to generate significant public revenue is with an IVU.  But as noted above, at its current level the IVU works to depress the local economy while failing to generate income.

I understand that most people who are leaving don't do this because of taxes but simply because they don't find a (good paying) job here on the island.
Now, since most of them seem to be people who have some form of higher education it is a brain drain and it also means less tax income.

For somebody who is used to the european sales tax levels, PR is paradise. (Germany 19%, France 19.6%, Netherlands 21%, UK 20% Sweden 25% just to mention a few..) Over there the tax level is not so visible because it is included in the price that is mentioned and shown.

Hey WarnerW,
The IVU was 7% and fairly recently it was raised to 11.5%. When all else fails, raise the taxes, reminds me of the Sheriff of Nottingham. Drain the population, what are they going to do but pay, Ha!

People are forced to go to the grey market to get services, unfortunately that is harder with goods.

If you buy an item that is 2,000 like a good computer, paying an ideational 230 dollars for the government makes it hard to swallow. Me, I would get relatives in states with no sales tax or next to a no sales tax state to buy the item for me and ship it.

Exactly Rey,  Puerto Rico Needs to find a way for people especially  professionals, who are leaving the island in Drones, to find a reason to stay or to come back,  it's a self for filling prophecy here, tax, tax and more tax is not helping anybody‘s situation here.

The poor, or even the medium income families will not be Able to afford to live here anymore, it's almost at that point now,  I can see it already, come to live in beautiful Puerto Rico, paradise for the rich, if you can afford to pay the Taxes, And the high cost of living Then you can afford to live here,  Beautiful beaches,  tropical forests,  if you make over 500 K then this is the place for you. I seriously hopeThis is an extreme exaggeration, But this is the path the government is setting.

Well it is almost there, I guess I am not helping by bringing all the rich gringos, 😂😂😂😂😂

Spencerazac wrote:

The poor, or even the medium income families will not be Able to afford to live here anymore, it's almost at that point now,  I can see it already, come to live in beautiful Puerto Rico, paradise for the rich, if you can afford to pay the Taxes, And the high cost of living Then you can afford to live here,  Beautiful beaches,  tropical forests,  if you make over 500 K then this is the place for you. I seriously hopeThis is an extreme exaggeration, But this is the path the government is setting.

Yeah, and to Gary's observation that those leaving the island are looking for work, not lower taxes, it seems to me to be a collection of odd policies that produce conflicting and undesirable outcomes.

I think Gary is right that most leave looking for work.  Why is there no work locally?  11.5% IVU means that I'd much rather buy online and ship here than shop locally.  I'll buy locally the things I can't ship or that I need immediately, but for everything else, I'll buy elsewhere.  So because of high taxes the local market collapses, and there are too few jobs for those who we might call "blue collar", the low and semi-skilled workers.  So they leave looking for better opportunities.  And there are lots of these people, and there are lots of better opportunities on the mainland.

Meanwhile the professional classes are those that are hit with high income taxes, as well as low salaries relative to the mainland.  If I make $60,000/year (three times the local average) then I pay $20,000 in income taxes.  Now I've got $40.000 to live on, paying an additional 11,5% on purchases.  No wonder these folks move to the mainland.  And these are doctors, lawyers, accountants, etc.

Lastly, policies like Act 22 attempt to entice wealthy "gringos" to come and invest locally, promising zero taxes on income from those local investments.  But local taxes make such investments less likely to turn a profit than a similar investment on the mainland, even with the taxes that must be paid there.  So what you are likely to get are folks like me -- captivated by the beauty of the island and its people, but relying on retirement income and not the local economy for my support; and on such a relatively fixed income, looking for ways to keep my costs down, which means avoiding the IVU (and water and power rates as well).  Good for me, not so good for the future of the island.

If you followed my link above to the Forbes article you'd see that the Laffer curve has a point at the peak of the curve where tax revenue is maximized.  It seems that Puerto Rico has pushed beyond that point.  But even more concerning, the optimal point is before and below the peak, where there is still significant public revenue, but the tax and regulatory environment is one that promotes investment and growth.  Puerto Rico is very far from this "growth maximizing" point.

Interesting discussion, everyone

IMO The current tax structure here has really fueled the underground economy.  All the trades here strongly prefer cash and some will offer no tax on some stuff for cash.   The volume of the underground economy can be estimated by various models. 
If anyone has details on this please share. 🤔

Dr. Friedrich Schneider seems to be "the guy" on shadow economies.  Two ways to measure.  First, a simple random sample and questionnaire.  This method is subject to the same sorts of problems that accompany such instruments and self-reported data.  Second way is to calculate the demand for cash and then exclude all known (reported) cash transactions.  What remains is un-reported cash transactions, or the shadow economy.  Brief article on it here.

Oh, taxes and regulatory burden (both economic "costs") seem to be the twin driving forces in a shadow economy. 

Hmmmm.

High taxes and arcane regulations.  Sound familiar?