Even as the fight continues against a new industry tax in the U.S., medical device companies are shifting their attention toward another tax specific to Puerto Rico that they say will do far more harm than good.
At issue is an industry tax imposed in 2010 that was designed to decrease from 4% in 2011 to just 1% in 2016. But the Puerto Rico Treasury wants to raise that number back to 4% and keep it there through 2017. Industry trade group AdvaMed is sounding off against the idea, with AdvaMed CEO Stephen Ubl arguing in a statement that "this additional burden will force companies to make tough choices about cuts in R&D, employment and possible significant delays in capital improvements."
In short, the industry group wants Puerto Rico's governor to reconsider what it calls a "damaging" tax increase and focus instead on improving the territory's overall business climate.
There is plenty at stake. Puerto Rico can tout thousands of medical device manufacturing jobs, from companies including Zoll, Zimmer ($ZMH), Abbott ($ABT) and C.R. Bard, which announced in June plans to pour more than $40 million into a major expansion of its device manufacturing operations there.
In making its case to revise the Puerto Rico tax, AdvaMed can also point to actions taken before and after the Affordable Care Act-related device 2.3% device industry tax went into effect Jan. 1. Stryker ($SYK) slashed its workforce 5% in 2012, blaming the tax. Just in January, Boston Scientific ($BSX) said it would eliminate up to 1,000 jobs this year, in part because of the tax's estimated $75 million cost to the company. Smith & Nephew ($SNN) revealed that it would eliminate 100 jobs in the U.S., and the company blames the tax for its decision.
AdvaMed wants Puerto Rico to pursue other means to economic recovery. Officials there, at least, are likely watching the national device-tax related layoffs to gauge the potential impact of their own tax at home. And now the pressure is on to do something.
- read the release
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