Wal-Mart Stores sues Puerto Rico over income tax hike

Retail giant Wal-Mart Stores Inc. filed suit against Puerto Rico over a new corporate tax structure it calls “onerous and unconstitutional.” The company said in its federal filing that it will “reconsider its operations” on the island if the situation doesn’t change.

Wal-Mart estimates that it will be asked to pay 91.5% of the net income it earns in Puerto Rico in taxes. That is about three times the average tax rate the retailer says it pays on average elsewhere in the world.

Puerto Rico has raised taxes in an effort to make up deficits in state coffers. The tax hike only applies to companies with revenues 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,” Wal-Mart asserted in the legal complaint that it filed on Friday (Dec. 4).

Wal-Mart has 55 stores in Puerto Rico and employs nearly 10,500, according to its website. This is a tiny fraction compared to the 6,250 other retail stores it runs in its international division and the roughly 5,000 stores it operates in the U.S.