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Investor oPts- out froM tax IncentIves
Without Act 60, Investing in Puerto Rico is Still Worth It
Singaporean firm opens a branch on the island
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Zoe Landi Fontana, The Weekly Journal @Landi_Zoe
Outside investing on the island is practically synonymous with Acts 20 and 22, combined under Law 60 of the Puerto Rico Incentives Code Act. The incentives create an environment of minimal taxation - something that supporters believe will encourage economic growth for the island’s entire population.
But does a 4% tax rate, not to mention 0% on capital gains, really attract companies that will create significant and long-lasting change by merely creating a few jobs?
Opting Out Of Act 60
Ravi Kumar is an investment professional from Singapore with a diverse portfolio of businesses: Launchpad, a global private equity firm; Nought Labs, a global strategy firm, and The 5th Floor, a global coworking brand. He recently opened a branch of The 5th Floor in Puerto Rico.
In conversation with THE WEEKLY JOURNAL, Kumar explained his decision to invest in Puerto Rico without opting into the tax incentives that attract so many others. “At the end of the day, we find that the most sustainable way forward is first to create value for the people here. And that really sets us up for long-term growth. Trying to take advantage of the extra money, I think that that isn’t so well with us, you know, with the philosophy of creating value,” Kumar expressed on the topic of Act 60. “We’ve always been in a position where, let’s see how we can first help. And then you know, we can talk about the rest down the line”.
Puerto Rico and Singapore may seem like they have very little in common, but they have much to learn from each other.
“I come from Singapore. [There are] a lot of
Ravi Kumar, partner at investment firm Launchpad. >LinkedIn
similarities between Puerto Rico and Singapore like both are island states. And here’s a fun fact - Singapore is a copy of Puerto Rico’s blueprint forty years ago. Somehow Singapore just did it a bit better. And also, now I see a lot of ways that Puerto Rico can learn from what Singapore has done,” said Kumar.
Puerto Rico, Kumar explained, is much like Singapore in that it’s an entry-point, “We see it as an entryway into Latin America while enjoying that stability, or the U.S. recognition, that comes with it.”
A Foreigner In The Market
As a foreigner, Kumar is looking to learn a lot before deciding where to take his next steps.
“[Because] we’re relatively new in the market we try to learn as much as possible - what’s going on on the ground, ready for partnerships with entities that have already been here that are wellpositioned. [And] now we’re also trying to talk to the Chamber of Commerce. [Whenever] there’s a foreigner coming in, there’s sometimes a bit of resistance, you know, being a foreigner, so we just want to learn at this point,” he said of his current situation on the island. From what he’s seen so far, Kumar believes there is a lot to bet on in Puerto Rico.
“So the way forward is, right now [Puerto Rico] is very reliant on the government to help people out. But I think this is a good opportunity for both public and private to come together and see how we can work together. Because you cannot entirely rely on the government, we all know, like, the government can be very cautious and a lot slower implementing things, whereas the private sector, they’re a lot more agile. I think there needs to be a meeting of the minds on this too,” he described the relationship between sectors.
Ravi Kumar Investment professional
Lottery winnings and war in Europe among recurring fraud schemes
The cost of fraud in the U.S. has increased to more than 6%
Juan A. Hernández, The Weekly Journal
Almost everyone with a cellphone, a computer or an e-mail account has received a communication about an unclaimed lottery prize, the availability of federal funds, or more recently, about funds blocked by the war in Ukraine… all you need to do is provide some basic information and the money is yours. Yeah, right.
These are but a few of the fraud schemes scammers use to steal people’s money or identity for illegal purposes.
According to LexisNexis Risk Solutions website, the cost of fraud for U.S. financial services and lending firms has increased between 6.7% and 9.9%, when compared to data before the pandemic. As of last January, for every dollar lost to fraud in the U.S., financial services firms lost more than $4.00. In 2019, those losses were $3.25, and $3.64 in 2020. The LexisNexis Fraud Multiplier for U.S. lenders is now $4.16, compared to $3.90 in early 2020, prior to the pandemic.
“Fraud impacts all levels [of economic activity]. We cannot think less of it because it only affects one, instead of the other. It affects everything… from people’s confidence on financial processes to financial assets, even if the defrauded assets are recovered,” said Zoimé Álvarez, executive vice president of the Puerto Rico Bankers Association (PRBA). But, even though the losses due to financial fraud are in the range of billions of dollars every year, that amount is merely “a fraction” of the total amount of both personal and commercial
Puerto Rico Bankers Association’s public service campaign ad. transactions conducted every year, Álvarez assured. “Since the creation of the credit card, it [fraud] has always been considered something minor when compared with the global use of the payment method. Proportionally, it is …scammers’ pitch depend on something minor because there are their ability to convince the hundreds of millions of transactions being done victim they are who they claim through credit and debit, to be and that he can validate the and electronic transfers,” explained the PRBA truthfulness of the information they are providing. executive. Still, Álvarez recognized that Zoimé Álvarez electronic devices, credit Executive Vice President, PRBA and debit cards must be protected “like if they were cash.”
What People Fall For
“Scammers are very creative people and their success depends on using the trendier methods,” argued Álvarez, who quoted as an example of a possible scam the blackout that affected Puerto Rico last week. “Local scammers –but they could be anywhere in the world– could take advantage of this circumstance by posing as an official of the Treasury Department and calling a person ‘to inform’ him that he may not receive his tax refund check because of the blackout, if he does not provide some personal information. Knowing there was a blackout, a concerned taxpayer may consider such claim to be true and provide the information the scammers require and be exposed to significant losses,” said Álvarez.
For the PRBA vice president, “scammers’ pitch depend on their ability to convince the victim that they are who they claim to be and that he can validate the truthfulness of the information they are providing.” And this can be done via a phone call, a text message, an email or a regular letter.
According to the Bureau of Criminal Investigations (CIC, for its Spanish acronym) of the Puerto Rico Police Department, this type of crime recurs because people do not verify the validity of the source that initiates the contact, and volunteer their personal information.
For María Ripepi, president of the PRBA’s Security Committee, today people are giving away “unknowingly,” all the information scammers need to continue in business.
“People publish all their personal information on their social networks. Scammers identify the latest social and market trends and use that information to create false and fraudulent campaigns. And since many people saw those campaigns on social networks, they assume they are real, and they fall for them,” Ripepi argued.
What To Do
In the second phase of its public service campaign about financial fraud –“Si huele a pescao, es un pescao” (If it smells fishy, it is a fish) – the PRBA identifies the most common fraud methods and suggest people how to act if they come across suspicious communications requiring personal information.
The campaign, which includes print and video ads, identifies phone calls, text messages, emails, unsolicited internet links and printed documents as possible methods for scammers to try to obtain information from victims. People are urged to rely on their suspicions to avoid falling for the scam. “If it looks too good to be true, it probably isn’t,” said Álvarez.
To avoid falling victim to fraud, Ripepi reiterated the campaign’s recommendations: 1. do not provide any personal information; 2. do not reveal your passwords/secret numbers; 3. do not follow unsolicited links, and 4. do not act under pressure.
