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Getty Images / Joe Raedle

Wal-Mart Is Taking Puerto Rico's Tax Hike To The Courts

In response to an "onerous" tax hike in Puerto Rico, Wal-Mart decided to sue the U.S. territory.

By Katie Link | December 7, 2015

As if an economic "death spiral" wasn't bad enough, now Puerto Rico has another thing to worry about. Late last week, the government was slapped with a lawsuit from the island's biggest private employer over a tax dispute.

Wal-Mart operates 55 stores there and employs nearly 15,000 people on the island. The Arkansas-based company is angry about a tax hike it calls "onerous and unconstitutional." (Video via Wal-Mart)

Because of the tax increase, Wal-Mart estimates it will have to pay 91.5 percent of its net income in Puerto Rico in taxes. That's three times what it pays in taxes anywhere else.

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Puerto Rico enacted the hike to help pay off its debts. The tax applies to goods imported from offshore affiliates to local companies that make more than $2.75 billion.

So that applies to Wal-Mart and ... Wal-Mart. The company feels pretty singled out. According to Forbes, Wal-Mart is the only entity on the island to face such a high tax.

No huge surprise: The company said it will "reconsider its operations" if the situation there doesn't change.

But isolating a large employer probably isn't the best move for the Puerto Rican government right now. The island is out of cash and has asked the U.S. Supreme Court to review a debt-restructuring law to allow it to apply for bankruptcy.

The island's unemployment rate is around 12.4 percent, so keeping 15,000 people in those Wal-Mart uniforms may be vital enough to reverse the tax. For now, it's up to a district judge to decide.

This video includes images from Getty Images.

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