Fiscal Oversight Board says revenue loss would make repeal unrealistic
Eliminating the long‑standing crude oil tax known as the Crudita would blow a $1.675 billion hole in the government’s budget over the next five fiscal years unless lawmakers identify permanent, recurring offsets, the Financial Oversight and Management Board has told legislators.
In an August 13 letter to Senate President Thomas Rivera Schatz, Oversight Board Executive Director Robert F. Mujica responded to the Senate’s request for an official assessment of proposals to repeal portions of the tax, which currently funds essential government services through the General Fund. Although the revenues created under Act 1‑2015 are not legally pledged to any debt under the Highways and Transportation Authority (HTA) or the Commonwealth’s Plan of Adjustment, the Board stressed that their removal would have “significant consequences for the funding of essential services” and jeopardize compliance with the Fiscal Plan.
The Crudita, increased in 2015 to stabilize HTA finances, was later redirected to the General Fund through executive action and by Act 53-2021. Since then, the tax has become a major source of recurring revenue for education, public safety, healthcare, and pensions. Mujica noted that eliminating it without offsets “would create significant budgetary issues and would not be fiscally responsible.”
The Board’s preliminary fiscal analysis projects annual losses of $328 million to $345 million from FY27 to FY31, totaling $1.675 billion. The breakdown includes an estimated five-year loss of $628 million from the Act 1-2015 excise tax, $679 million from the Act 31-2013 excise tax, and $368 million from the base petroleum products tax.
Rivera Schatz also asked whether the Board would support eliminating the Crudita as a standalone measure if lawmakers identify offsets. Mujica responded that the magnitude of the revenue loss makes a narrow repeal unrealistic. “It is difficult to envision a truly revenue‑neutral repeal of the tax,” he wrote, adding that any change would need to be part of “a broad, holistic and integrated tax reform that can position Puerto Rico for long‑term economic growth.”
The Board emphasized that Puerto Rico lacks the fiscal capacity for recurring tax cuts without structural reform. It pointed to its recent authorization of a one‑time $554 million tax incentive—Joint Resolution 6‑2026—as evidence that relief must be temporary unless paired with comprehensive reform. “Fiscally‑responsible tax relief can only take the form of comprehensive tax reform or targeted, one‑time tax incentives,” the letter stated.
Still, the Board acknowledged the Legislature’s interest in addressing cost‑of‑living pressures and invited lawmakers to collaborate on a broader tax overhaul. “If this initiative is a priority for the Legislative Assembly,” Mujica wrote, “we invite you to engage with the Oversight Board regarding how the elimination or reduction of the Crudita could be part of a larger tax reform initiative.”
