Excise tax collection drops $4-M in FY99

The trickling number of visitors to the Northern Marianas and the sudden turnaround in their spending behavior pulled down the government’s excise tax collection in Fiscal Year 1999 by over $4 million, from $24.3 million in the last period to $19.9 million.

Officials attribute the dramatic drop in excise tax collection to the Japanese and Korean travelers’ weaker spending power primarily caused by the depreciated value of the yen and the won against the U.S. dollar.

A government report showed that the average excise tax quarterly collection fell to $4.9 million in Fiscal Year 1999, from $6.1 million during the previous year.

In 1997, the CNMI government collected an average of $7.3 million in excise taxes per quarter, higher from the 1996’s figure of $6.25 million every quarter.

Statistics obtained from the Central Statistics Division of the commerce department disclosed a declining trend in the amount of excise tax collected by the finance department beginning 1998.

The Marianas Visitors Authority noted a significant drop in the arrival of visitors to the CNMI since early 1998 or a few months after major Asian currencies tumbled against the American greenback.

Arrival figures spiraled down to 490,200 in 1998 from the previous year’s 694,900. In 1996, more than 730,000 visitors from Japan, Korea and other countries took a trip to the islands.

While arrival statistics improved last year to 501,800 visitors, business analysts said the increase was not significant enough to reach the cash registers of department and duty-free stores around the island.

Officials pointed out that while Japanese and Korean tourists have started taking overseas trips again, following a major region-wide economic stumble, consumer confidence has remained weak and is not likely to improve within the year.

Industry players are concerned about the spending behavior of younger travelers, particularly women, who are no longer taking overseas trips as much as they did in the past.

An analysis of the spending behavior of Japanese travelers noted a dramatic decline from September 1997 to August 1998 among travelers in their early twenties and late forties.

The biggest drop was recorded among women in the 45-49 age bracket at 14 percent, while men of the same age posted a 13.7 percent decline. Overseas trips among women aged 20-24 years went down by 11 percent, while their male counterpart posted 10.6 percent fall.

Studies have also noted a significant change in the travel pattern of young Japanese who now take one overseas trip to merely satisfy their desire to go abroad. Once they fulfill this, they start looking for alternative domestic destinations.

People in their 40s, who mostly comprise the active wage-earners segment in Japan, are scaling down their overseas travels since they are more concerned about their financial obligations that include housing loan settlement, their children’s education and future financial security.

There has also been a sharp decline in group tours funded by organizations and observers predict that there would be no full recovery on this segment even if the Japanese economy returns to normal.

At the same time, government finance managers have projected a 30 percent plunge in excise taxes due to the slumping visitor arrivals into the CNMI. The apparent stabilization of income taxes failed to offset the negative impact of the dwindling excise taxes.

In order to boost revenue collection. the finance department is recommending a 10 percent uniform tax rate, as well as the scrapping of excise tax excluding tobacco, alcohol and personal commodities worth over $1,000.

This proposal was opposed by various sectors for fear that the replacement of sales tax with a flat rate would adversely affect the tourism sector which was then the highest revenue-earner among other local industries.

The Commonwealth’s coffers are not likely to enjoy any increase in excise tax collection following projections by the Japan Airlines that stabilization of the Japanese tourism market is expected to take place by not later than 2001.