By DANICA COTO
2014-02-19 03:01 AM
SAN JUAN, Puerto Rico (AP) -- Puerto Rico has created a task force to crack down on tax evaders and increase revenue to help pay off $70 billion in public debt after recent downgrades forced the island's credit rating into junk status, officials said Tuesday.
Treasury Secretary Melba Acosta said the government is targeting both business owners and individuals, noting that authorities are investigating more than 100 cases and that more are expected to follow.
The department already has referred another 12 cases representing a total of more than $8 million in unpaid taxes to the island's justice department.
"This money belongs to the people of Puerto Rico," said Justice Secretary Cesar Miranda. "It represents a teacher's salary, a town's road, a police officer's uniform."
Two business owners already have been charged with 36 counts of tax evasion and illegal appropriation, and officials warned that dozens of others could face similar accusations.
Acosta said the government is taking other measures, including publishing the names of violators and applying a current 7 percent sales-and-use tax to merchandise as soon as it arrives at the island's docks.
Puerto Rico currently has a 56 percent capture rate and loses some $800 million in revenue annually as a result, according to economist Gustavo Velez.
The announcement comes as Puerto Rico prepares to re-enter the bond market and as legislators hold public hearings for a measure that would authorize the emission of up to $3.5 billion in bonds.
The money would be used to pay old debt, said Eduardo Bhatia, president of Puerto Rico's Senate.
"Puerto Rico has to live within its means, and it has not done so," he said during the hearings. "Everyone's collective patience is running out...We will approve this transaction, but it will be the last one."
Government officials planned to hold a webcast later Tuesday with investors to talk about those plans.
Puerto Rico's bonds have been popular with U.S. investors because they are exempt from federal, state and local taxes, and its debt is held by roughly 70 percent of U.S. municipal mutual funds, according to Morningstar.
However, Standard & Poor's downgraded Puerto Rico's credit by one notch earlier this month, while Moody's Investors Service and Fitch Ratings have lowered it by two notches.
The island of 3.7 million people also has entered its eighth year in recession and faces a 15.4 percent unemployment rate, higher than any U.S. state.