HANMI: Tax breaks, not hikes, needed

The Hotel Association of Northern Mariana Islands has asked legislative leaders to provide incentives to expansion and renovation projects of existing hotel establishments.

At the same time, the association has opposed any attempt to further increase the room occupancy tax or additional taxes directed at the hotel industry.

According to Ron Sablan, president of the association, such tax incentive would encourage more hotels to carry out expansion projects amid the slump on the island’s tourism economy.

Implementation of a General Excise Tax exemption for construction costs for new projects or renovation of establishments would help stimulate investment and generate the needed construction activity. “This exemption would help stimulate investment and generate needed construction activity as other industries are exempt from assets items,” said Sablan.

In 1997, hotels in the CNMI paid $11.4 million in extra taxes which no other industry on the island has ever done. Based on the 1997 annual average cost of a CNMI hotel room ($136.06) and the 10 percent tax rate, the average tax bill would be $13.61 per night. “The cost of doing business and the cost of taxes are increasingly making us less competitive with other tourist destinations,” Sablan said.

Hotel executives are also seeking tax credit for the amount they are spending in promoting the Northern Marianas as a destination. Sablan noted that providing an incentive to a hotel which spends $500,000 in promoting the CNMI would encourage the establishment to double its efforts in enticing tourists to visit the island.

While a package of incentives will be offered to investors who will set up businesses in the soon to be established Free Trade Zone, the HANMI president pointed out that the CNMI government should also consider providing tax credits to businessmen who have opted to stay on the island despite the economic crisis.

Furthermore, members of the association were asking for incentives to promote hiring and training of local residents.

Hotel occupancy has greatly suffered with the decline of visitor arrivals in the CNMI since Asia’s financial crisis begun more than a year ago. In a move to save the sagging tourism economy, the Marianas Visitors Authority has launched the Visit the Marianas ’99 which hopes to provide more activities to tourists.