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Puerto Rico And Section 936: A Costly Dependence

Author

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  • Tomas Hexner
  • Glenn Jenkins

    () (Queen's University, Kingston, On, Canada)

Abstract

For over 70 years, U.S corporations have been granted tax incentives to operate in U.S territorial possessions, most notably in Puerto Rico. The purpose in so benefiting what have become known as “possessions corporations” is to attract U.S. capital to these developing territories, with the goal of creating jobs. In summary, section 936 has ceased to be an efficient means of attaining employment and attracting producing investments to Puerto Rico and other U.S possessions. While the initial rationale for the credit was the creation of jobs and the stimulation of economic activity in the possessions, the outcome has been far different. Firms with intangible assets now take advantage of transfer pricing laws to maximize profits without making the investments that would create sustainable growth in Puerto Rico. The fundamental questions then are: First, can the long record of disappointment be ended? Second, can the legislation provided in the 1993 budget transform section 936 into an instrument of public benefit, rather than of private profit? We conclude that the costs of section 936 will continue to outweigh its benefits.

Suggested Citation

  • Tomas Hexner & Glenn Jenkins, 1995. "Puerto Rico And Section 936: A Costly Dependence," Development Discussion Papers 1995-04, JDI Executive Programs.
  • Handle: RePEc:qed:dpaper:119
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    File URL: https://cri-world.com/publications/qed_dp_119.pdf
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    Cited by:

    1. Zadia M. Feliciano & Andrew Green, 2017. "US Multinationals in Puerto Rico and the Repeal of Section 936 Tax Exemption for U.S. Corporations," NBER Working Papers 23681, National Bureau of Economic Research, Inc.
    2. Glenn Jenkins & J. TOMAS HEXNER, 1994. "Puerto Rico - The Economics of Status," Development Discussion Papers 1994-04, JDI Executive Programs.

    More about this item

    Keywords

    Puerto Rico; investment incentives; private; not public benefits;

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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