SAN JUAN, Puerto Rico – A federal tax reform bill is outraging officials in Puerto Rico who say it threatens to crush the backbone of the island's economy when they need help recovering from Hurricane Maria.
The bill approved Wednesday contains a 12.5 percent tax on intangible assets that could affect dozens of U.S. manufacturing companies in Puerto Rico. Manufacturing accounts for nearly half of the island's economy and a third of government revenues.
Controlled foreign corporations that make up the bulk of Puerto Rico's manufacturing sector and generate more than $2 billion a year for the government are the ones affected by the new tax.
Economists said those companies could reduce their level of production or simply leave, causing Puerto Rico to lose its competitive edge and struggle to attract new investment.
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