CNMI tax amnesty now in effect up to Jan. 1, 2014

For only the third time in CNMI history, taxpayers with delinquent returns can now settle their taxes without having to pay penalties and interests following Gov. Eloy S. Inos’ signing yesterday of a tax amnesty law that will be in effect until Jan. 1, 2014.

Unlike the two previous tax amnesty laws, this one will run for only a month.

Rep. Tony Sablan (Ind-Saipan), author of the tax amnesty bill, reiterated yesterday that this is one of the most effective ways to generate additional revenue during these difficult times and “without raising taxes,” rather than losing out on both the back taxes and penalties.

Sablan, chairman of the House Ways and Means Committee, said the government’s obligations are “piling up” and the Legislature has to continue looking for ways to generate new and additional revenues.

He cited, for example, the anticipated steep increases in government health insurance premiums as early as Jan. 1, 2014, which was among the main issues in Tuesday’s leadership meeting between the governor and lawmakers.

“If people owe taxes, they can now come forward and settle those back taxes with Finance’s Revenue and Tax, work out a payment plan, and their penalties and interests will be waived. This would help generate additional revenues we badly need,” Sablan told Saipan Tribune.

Sablan’s House Bill 18-28, House Draft 1, Senate Draft 1 is now Public Law 18-29.

The former CNMI immigration director reiterated that this is not “tax forgiveness,” but only a waiver of penalties and interests for those who want to finally come forward and pay what they owe the government in taxes.

“I hope that the circumstances have changed, so that those businesses, for example, that closed down because of back taxes, would be willing to settle their delinquent returns and reopen their businesses. In that way, they get another chance to run their business and help the economy further,” he added.

The CNMI government provided tax amnesty programs in 2001 and 2005 through Public Laws 12-51 and 14-28, respectively, in an effort to collect outstanding tax revenues.

Under a tax amnesty program, penalties and interests on unpaid or unreported taxes are waived. It allows taxpayers to voluntarily come forward and take action to comply with tax laws.

The tax amnesty does not apply to the following: persons against whom a criminal or civil action has been initiated and is pending for any violation of CNMI tax laws or any person being investigated for fraud; any person who has been convicted of tax fraud; any person whose source of income is illegal; or any person who fraudulently files a special return under this new law.

Taxpayers who already received amnesty under Public Laws 12-51 or 14-28 are no longer eligible for tax amnesty under P.L. 18-29.

The new tax amnesty program is effective upon its Dec. 4 signing into law and until Jan. 1, 2014. It expires on Jan. 2, 2014.

The Finance secretary is authorized to promulgate rules and regulations to administer this new statute.

Covered under the proposal are all taxes, including withholding taxes and all returns, including deductions, exemptions, and credits erroneously claimed in returns filed for all tax years prior to calendar year 2013.

These include taxes for wages, salary or earnings; gross revenue tax; room, bar and jackpot tax; excise tax; and income and/or tax pursuant to NMTIT.

Tax amnesty, according to the Ways and Means Committee that reviewed and recommended passage of the bill, usually results in accelerated collection of overdue tax revenues to the government, although the program’s primary goal is to bring taxpayers back into compliance, thus strengthening future revenue collection.

Another revenue-generating bill that has yet to find its way to the governor’s desk is an electronic gaming legislation that the Senate will take up at its next session. This comes after the Senate essentially killed anew a House bill legalizing casinos on Saipan. Video lottery has also become legal but the government has yet to issue a request for proposals for its operations.

With the demise of the garment industry, the CNMI now only has one industry—tourism.