Walmart is MAD at Puerto Rico.
Walmart and Puerto Rico are entering a feud over what the company is calling "onerous and unconstitutional" tax increases.
It was such a dramatic tax increase the Walmart is estimating that they will have to pay nearly 92% of its net income within Puerto Rico in taxes - over three times what Walmart would pay elsewhere. This is due, in part, to the fact that Puerto Rico is extremely short on cash (they are over $70 billion in debt) and has accused Walmart of causing even more problems because it isn't paying its fair share of taxes.
Part of the plan to dig their way out of that debt is to double the taxes on big companies like Walmart that get their supplies from off the island. According to CNN Money, the tax only applies to companies that make over $2.75 billion a year.
"No government should be permitted to drive a company -- the largest private employer -- out of business through a special tax applicable at its highest rate only to that company," Walmart said in the legal complain that they filed on Friday.
The company currently has 55 stores on the island that employs around 15,000 people. However, all of those people may be out of their jobs if the island doesn't change the tax situation. Walmart wants them to figure it out quickly, in part because Puerto Rico will have to pay them back, and that money is adding up quickly.
This is a problem, because Puerto Rico already defaulted on a portion of their debts in August, and are set to default on a larger portion on January 1. This problem is causing residents to leave Puerto Rico and move to the United States. Unemployment is rising and currently sits at 12%.
Puerto Rico's governor is struggling with the debt and has pleaded with Congress to allow the island to declare bankruptcy, much like with what Detroit did. However, the Republican controlled government isn't likely to allow that to happen.
"We continue to question if Washington is prepared to offer material help to Puerto Rico. This suggests more defaults are likely as the Puerto Rican government appears to lack the ability to meet its debt obligations, wrote Jaret Seiberg.
Cate Long of research firm Puerto Rico Clearinghouse believes that Walmart will have a good chance of winning this case due to discrimination.
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"Their tax law in general is very screwed up," says Long. "There are loopholes all throughout the Puerto Rico tax code."