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Old 12-10-2009, 05:56 PM   #1
Rum Runner
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Default U.S. House extends rum rebates to P.R., USVI

Credit to Caribbean Business Online
by : JOHN MARINO
marino@caribbeanbusinesspr.com

The U.S. House of Representatives approved an extension of the rum tax cover-over that represents some $486 million for Puerto Rico in the next fiscal year, Resident Commissioner Pedro Pierluisi said Wednesday.

The legislation – the Tax Extenders Act of 2009 – also establishes the extension to Puerto Rico of Section 199 of the U.S. tax code that reduces to 32% from 35% the tax rate that U.S. companies doing business in Puerto Rico must pay, Pierluisi added, saying this represents some $185 million for the island.

Under the cover-over extension, Puerto Rico and the U.S. Virgin Islands get $13.25 of the $13.50 tax slapped on each proof gallon of rum. The bill increases the amount from a $10.50 rebate to the territories.

Pierluisi reiterated Wednesday that he would push for a “reasonable” cap on the use of federal rum tax rebates for manufacturer subsidies.

Pierluisi filed legislation earlier this year to cap such subsidies at 10% in response to the planned move of Captain Morgan rum from Puerto Rico to the U.S. Virgin Islands in 2012. Pierluisi, and the other backers of the bill, said the USVI offered Diageo, the owner of the Captain Morgan brand, about 50% of the rum rebate money it receives to set up shop in St. Croix. The USVI, which struck a similar deal with the owners of Cruzan Rum, insists the approach was made to Diageo only after it decided move Captain Morgan production from Puerto Rico.

Puerto Rico has been lobbying to get congressional action on the issue but so far Congress has not gotten involved.

Recently, the Congressional Black Caucus wrote U.S. House Ways & Means Chairman Charlie Rangel, D-N.Y., expressing support for the USVI’s economic development efforts.

The letter calls for Rangel to continue to support the rum excise tax cover-over program, the economic development program which rebates excise taxes paid by rum-makers back to the producing U.S. territories, and to reject Puerto Rico’s efforts to scuttle the USVI’s legitimate economic agreements.

In the letter signed by Chairwoman Barbara Lee and three-quarters of the caucus, the CBC questioned Puerto Rico’s efforts to implement retroactive tax policy that would both damage the USVI finances and stop it from modernizing and improving the environmental sustainability of its rum industry.
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