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1 Alan Cole, Puerto Rican Competitiveness and Pillar Two 1 (2024)

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* TAX FOUNDATION




Puerto Rican Competitiveness

and Pillar Two



Alan Cole         Senior Economist

July 2024




Key Findings

•   Puerto Rico has long relied on low taxes to attract real investment and profit shifting.

•   Pillar Two, the global minimum tax agreement, presents a threat to Puerto Rico's model.

•   Puerto Rico may be well served by designing a new competitive tax code that works within the bound-
    aries of Pillar Two.

 • Various constraints on Puerto Rican policy and conflicting interests have made it difficult to enact a
    comprehensive legislative response.

 • The  US federal government could be more helpful in representing Puerto Rico in international tax poli-
    cy matters.

 • The  Puerto Rican experience thus far exhibits some of Pillar Two's drawbacks. Jurisdictions pursuing
    a tax-competitive model are incentivized to adopt complex and opaque legal structures rather than
    simple, low rates.













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