Beyond Act 22: How Puerto Rico Operates as a Tax Haven

Did Act 22 fail, or is it working as designed? Despite politicians promises of economic development, investment, and job creation, Act 22 (2012) stands as an emblematic example of displacement policies in the Puerto Rican archipelago. However, Act 22 is not an isolated public policy; it is part of an extensive tax structure that has normalized the tax haven conditions for a select few, while fostering privatization and concentration of wealth.

Act 22, now integrated into the Puerto Rico Incentives Code (Act 60-2019), functions as the gateway to an ecosystem of exemptions designed to benefit foreign investors, luxury developers, and corporations. Meanwhile, local communities face rising housing costs, electricity rates, and general living expenses, as well as a growing loss of public spaces.

The problem is not only that Act 22 exempts individual investors from paying taxes on interest, dividends, and capital gains. It is that many beneficiaries accumulate multiple tax decrees under other exemptions—such as Act 74 (Tourism), Act 273 (Financial Entities), and Opportunity Zones—effectively evading most personal, corporate, and municipal taxes. This means that Act 22 beneficiaries also receive exemptions for development projects like Esencia and companies like Genera PR.

The latest report from the Puerto Rico No Se Vende coalition documents how these schemes operate in tandem. ‍

Under the guise of fostering tourism, renewable energy, or exports, policymakers have created a system that subsidizes luxury developments, privatizes essential resources, and drains public revenue without generating real benefits for the country.

As we expressed in a previous opinion piece, the government reported that, between 2024 and 2030, the country will lose $18.4 billion due to the Act 22 incentive. Added to this are hundreds of millions of dollars more in exemptions linked to tourism and others that the Government of Puerto Rico has been unable to control because it lacks the capacity to fully oversee the number of exemptions it continues to grant.

Under Act 74, hotels, resorts, and mega-projects receive up to 100% exemptions on income taxes, property taxes, and municipal contributions. The Esencia project in Cabo Rojo is a clear example of a Law 22 beneficiary that accumulates other tax privileges. Valued at $2 billion, this luxury development received about $497 million in tourism tax exemptions, even though it is primarily residential. The project includes exclusive residences, golf courses, and a private airport in a highly valuable ecological coastal zone. Affected communities and environmental organizations denounce displacement, environmental damage, and the loss of access to public spaces caused by the project. This is not an isolated case, but a direct consequence of a model that prioritizes the investor over the people who inhabit the territory.

Another example is the Normandie Hotel in San Juan, a historic landmark. An Act 22 beneficiary secured tourism exemptions under Act 60 for its restoration. While the developer presents the project as revitalization, communities have raised serious concerns regarding potential restriction on access to Escambrón beach and the impact on coastal wetlands. The question is unavoidable: revitalization for whom?

In the energy sector, private companies also receive reduced tax rates and full exemptions, even though their performance directly affects the country's daily life. Genera PR, a subsidiary of New Fortress Energy, received millions in incentives to manage power generation. However, blackouts continue, affecting hospitals, schools, small businesses, and homes across Puerto Rico.

‍The accumulation of decrees, cases of fraud, and lack of transparency confirm that this model has not only failed but is designed to make Puerto Rico a tax haven. The loss of public revenue means fewer resources for schools, health, and affordable housing. It means displaced communities, local businesses closing, and abandoned public spaces. That's because incentives concentrate investment in projects aimed at external capital and high costs, which encourages speculation in housing, rising rents, and the displacement of local economic activities. It also means saying goodbye to loved ones who leave due to the lack of opportunities and quality of life in the archipelago where they were born.

At the PR No Se Vende coalition, we know that rethinking this structure requires a public audit of all tax decrees, real transparency regarding who benefits and how much they cost the country, and a deep tax reform that ends the accumulation of privileges. It requires establishing clawback mechanisms to recover funds when investment promises go unfulfilled; halting new exemptions in sectors with clear evidence of displacement and gentrification; and redirecting those resources to affordable housing, public schools, hospitals, and the energy system infrastructure.

Imagining a Puerto Rico beyond Act 22 means envisioning a country where the incentive system responds to the needs of those who live here. It is a Puerto Rico where economic development no longer relies on the bad business of chasing outside interests, but instead strengthens the local economy, supports cooperatives and small businesses, protects our coasts, and guarantees access to housing, energy, and public spaces. We seek a Puerto Rico where tax policy stops serving as a tool of extraction and displacement, and instead creates opportunities to improve the quality of life for those of us who choose to stay.

A Puerto Rico beyond Act 22 exists, and it is a Puerto Rico for its people.

Ane Hernández Santos (they/them/elle) is a campaign strategist, writer, and organizer from Puerto Rico. Their work bridges culture, advocacy, and narrative change to build collective power in Puerto Rico and across the diaspora. Currently, they work as a Senior Campaigner at Popular Democracy and is part of the Puerto Rico No Se Vende coalition.

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