Airlines take aim at Puerto Rico fuel tax plan

A Puerto Rico government plan to sharply hike taxes on jet fuel could hurt the island’s tourism and overall economy, a leading aviation industry trade group warns.

Airlines for America, which groups major U.S. airlines, dispatched Sean Williams, its vice president for government affairs, to San Juan on Monday to voice its concerns over a proposed 33 percent hike in the tax on jet fuel from 2 cents to 3 cents per gallon.

“If this proposal moves forward it could end up damaging local employment and the economy,” Williams told Efe news agency.

Airlines would cover the tax hike by raising ticket prices, which could curb tourist visits and impact the overall economy, he said.

The industry group said fuel costs have risen twice as fast as income since 2000 and represent 35 percent of airlines’ operating costs.

Airlines for America said the tax increase could also hurt Puerto Rico’s position as an aircraft servicing center.

The fuel tax hike, Senate Bill 1132, is part of efforts by the administration of Gov. Alejandro García Padilla to cover his $9.64 billion spending plan for fiscal 2015 (starts July 1). The governor is calling for more than $1.4 billion in cuts spending plan and a range of revenue moves, including tax hikes and relief cuts, aimed at boosting annual income by more than $650 million in what is being billed as Puerto Rico’s first balanced budget in years. He also pledged $775 million to pay off debt.

Airlines for America also took aim at two other measures including a proposal to tighten financial reporting requirements for multinational firms operating in Puerto Rico. The other is a new requirement that half of revenue from flights to and from Puerto Rico be accounted for as business operations done in Puerto Rico. The trade group says that is unusual.

The trade group said it wants the same fiscal treatment that Puerto Rico gives to cruise lines, noting that the average flier spends 10 times more money in Puerto Rico than the average cruise passenger.

Source:  http://www.caribbeanbusinesspr.com