As the New York Times recently reported, a Federal judge has ruled the tax that Puerto Rico levied on Walmart was unlawful. Walmart argued that the tax totaled more than 100 percent of its profits.
From the article:
The judge, José Antonio Fusté of the United States District Court in Puerto Rico, said in his opinion on Monday that it gave him no pleasure to throw out the tax, considering the commonwealth’s dire financial condition. But he said it was unlawful and that Puerto Rico’s crisis was not an excuse “to take revenue that it’s not entitled to, to pay for essential services.”
The new tax was more than triple the old rate, he said, “designed to capture Walmart Puerto Rico, the biggest fish in the pond.”
It also gives me no pleasure to at least partially concur Walmart’s side in this dispute. It’s unrealistic to take the entirety of a business’s profits and expect them to continue operating in your jurisdiction. Puerto Rico is kind of an unusual case: it’s a US territory, but not an actual US state, at least not yet. I don’t know if it’s accurate to say it’s somewhat like a country within a country, but that’s the best description I can come up with. (It does have its own Internet TLD of .pr if that says anything.)
I am no fan of Walmart. I don’t shop there at all, even when the alternative is doing without until another retailer opens up shortly after daybreak. To me, their reputation is a store that sells “cheap crap” and on top of this, pays their employees poverty wages that the rest of us wind up subsidizing with our taxes. As I have blogged previously, the obscene pay their CEO gets doesn’t exactly help their case in my eyes, either.
But the alternative to Walmart prevailing in this lawsuit is even worse. It would basically give Puerto Rico’s government free reign to raise taxes at will, even to the extent of taking over 100% of a company’s profits. That’s a recipe for disaster; Puerto Rico would be shooting itself in the foot by doing this.
So, I applaud the judge for ruling in Walmart’s favor. It was the only sane thing to do.