Puerto Rico’s House of Representatives plans to vote Thursday on a proposal that would raise the sales tax and help the junk-rated island to sell debt.
The chamber will vote on the bill in a session scheduled to start at 11 a.m. local time, Representative Charlie Hernandez, the speaker for the House majority, said in a press conference at the Capitol in San Juan. Members are working on language to address the concerns of majority-party members who voted against a previous tax-overhaul bill last month, Hernandez said.
The current measure would increase the sales tax to 11.5 percent from 7 percent. Governor Alejandro Garcia Padilla and legislative leaders from his ruling Popular Democratic Party agreed last week on the framework for the proposal, part of a plan to balance the fiscal 2016 budget. The legislature has to approve the tax plan.
“We expect to have the votes to pass the tax bill tomorrow,” he said.
Puerto Rico is running out of time. Lawmakers need to pass a fiscal 2016 budget by June 30 and the commonwealth faces a $630 million payment to bondholders July 1. The Government Development Bank, which lends to Puerto Rico and its municipalities, will deplete its liquidity by Sept. 30 unless the island sells $2.9 billion of debt backed by oil taxes, according to the commonwealth’s latest quarterly filing.
The Senate has a session scheduled for the same time Thursday. There is enough support in that chamber for the tax increase, according to Senator Jose Nadal Power, chairman of its Finance Committee.
Raising the sales tax would help attract investors to the planned bond deal, according to the GDB. Proceeds would boost the bank’s cash and help avert a partial government shutdown. The bank had about $1 billion of net liquidity as of April 30, down from $2 billion in October.
Puerto Rico debt has rallied since lawmakers agreed on the tax proposal last week. General obligations maturing in July 2035 traded Wednesday at an average price of 82 cents on the dollar, the highest since early April, according to data compiled by Bloomberg. That’s up from 79.13 cents on May 13.