Puerto Rico To Tax Offshore Companies

The pharmaceutical industry is warning that a new tax on multinational firms operating in Puerto Rico that earn more than $75 million annually puts thousands of high-paying jobs in jeopardy and could deepen the economic crisis confronting the island, which has been in a recession since 2006. The tax increase, signed into law late last month, “will dramatically hinder” the ability of drug companies to continue their research and manufacturing activities in Puerto Rico, says John Castellani, president of the Pharmaceutical Research & Manufacturers of America (PhRMA), the drug industry’s main trade group. Puerto Rican officials say the tax on offshore companies such as Eli Lilly & Co. will raise $5.8 billion over six years. The measure takes effect on Jan. 1, 2011, and runs through 2016. “This could significantly reduce the ability of PhRMA’s members to operate in the commonwealth and to continue to make significant investments in researching and developing innovative new medicines for patients,” Castellani says.