RUNNING HEAD: Effects of Tax Increases on Walmart

University of Texas at El Paso

Rebecca Oshinbanjo
Professor Santiago
English 0312

Effects of Tax Increases on Walmart 2

The article Walmart Sues Puerto Rico over Astonishing Tax Increases
is about how Walmart in Puerto Rico sued the island government who was
trying to increase the tax from 2% to 6.5%. The article explains the reason
behind the government actions and the reaction of Walmart management to
their tax increment. Harris also explained the large rate of increment and the
detrimental effect it could have on the companys profit.
According to the island government, the increment was because
Walmart reports over $2.75 billion as gross revenue only in Bentonville
Arkansas, which makes it the largest private business in the environment.
The article also explains that, the tax increment law was as a result of the
current financial state of the United States commonwealth The increase
comes as U.S. commonwealth struggles to restructure $70 billion in debt,
(Harris 2015 p.1) explaining the background cause of the government action.
Harris made it known in his writings that, the United States commonwealth
except California and New York was having a hard time restructuring its
debts which made the supreme court decided to allow a law that will enable
Puerto Ricos government services reconstruct their responsibility. (Harris
2015)
As a result of the skyrocket tax, Walmart brought legal charges against
Puerto Rico requesting that the court should make it know that the new

dimension is unlawful and should not be enforced. The article made it known
that The new levy raised the estimated cumulative income tax on Walmart
Puerto Rico Inc. to an astonishing and unsustainable 91.5% of its net
income. (Harris 2015 p.1) This means that the new tax rate would be almost
the whole of Walmarts income which does not justify the management
effort.
Finally, the article gives an account of a case in the federal court which
came up as a result of a new law enacted by the Puerto Rico government.
Although according to the article, the law was made due to the financial
status of the U.S commonwealth, the most successful private company in the
environment sued the government to court saying that the law was
unconstitutional and should not be allowed to take please because the new
tax would be about 91.5% of their net income and therefore render their
business unprofitable.

References

Harris, A. (2015, December 5). Wal-Mart Sues Puerto Rico 'Astonishing' Over Tax Increases.
BloombergBusiness, p. 1.

This article is about an ongoing case in the district court of Puerto Rico between
the Puerto Rico government and Walmart over an increase in tax rate. The article
reports that, the increment was as a result of the financial status of the U.S
commonwealth as it finds itself battling to restructure its debt. Despite this considerable
reason, Walmart sued the government because the increment would amount to about
91.5% of its net income making their business unprofitable. The tax which was formally
2% was raised to 6.5% on goods brought in from outside Puerto Rico, a law binding on
organizations with gross income of $2.75 billion and above. I used this article because it
is related to my major as it talks about governments financial status, laws relating to

raising funds and managing state economy and how various governmental rules and
regulations, and how it affect private businesses by reducing their profit and their ability
to achieve their business goals. It also helps me to understand why certain decisions
are taken at the governmental level and how it tends to affect common people going
about their businesses both negatively and positively. Finally, this article is an eye
opener to peaceful means of tackling government when they make rules that tend to
infringe on our interest.