New tax system increases collection efficiency

Faced with pressures to refill stressed public coffers, the Department of Finance is fast-tracking the installation of a new tax system eyed to improve the government’s revenue collection capabilities and reduce margin of errors in the processing of tax returns.

According to Finance Secretary Lucy G. Nielsen, implementation of the new CNMI tax system is expected to be completed by next year since it is already over 75 percent complete.

“We may be required to take another year to complete the automation project. We are excited about this new system, and we are of course looking at operating the hardware in another two years after the software is completely installed,” Ms. Nielsen said.

Finance officials will hold a demonstration of how the new system works today before Gov. Pedro P. Tenorio, Insular Affairs program officer for the NMI Tax Integration Project James Johnson, U.S. Department of Agriculture Graduate School trainer for the project Gary Shea, and tax experts from Guam, U.S. Virgin Islands, Palau and American Samoa.

The finance chief added the new system will pave the road for the proper collection of revenues, as well as allow the taxation division to reduce the margin of errors in the processing of tax returns.

“This will also allow us to document business revenues and process refunds and rebates faster.” Ms. Nielsen told participants to the week-long 2000 All Islands Tax Administrators Conference at the Aqua Resort Club.

The new system is equipped with an application security designed to protect all information on it from unauthorized or unintentional access, disclosure, modification or loss.

It also has a high level of integration among its databases and subsystems, and is designed as a single system of highly integrated components. It produces a variety of taxpayer notices that are mailed to taxpayers like renewals of business licenses, filing errors, compliance status, and intent to lie, levy or seize.

Through the new system, any taxpayer owing money to the CNMI is notified of such debt, including penalties and interests. It allows tracking of penalties and interest accrue over time, along with the principle.

The need for a new tax system was first conceived by former Revenue and Taxation Director, and now finance department consultant, Rufin Inos back in 1993.

In 1995, the CNMI government submitted its first request for proposal to the Office of Insular Affairs, which granted $840,000 for the development of the new system in November of 1996. OIA required the CNMI to provide matching funds for the grant.

The contract with vendors for the installation of the new tax system was finalized and signed in December 1999, with the first physical work starting in March of 1998.

According to the finance chief, computerization will allow for the prompt detection of duplicate processing of a return, and potential double payment of a tax rebate.

Ms. Nielsen said the revenue and taxation division processed the 1999 tax returns on the new system which is currently under development stage, which paved the way for the fast-tracked release of this year’s refunds and rebates.

With the new system, the compliance branch will review nonpayment of rebates complaints, including whether a voucher has been prepared and submitted to the Division of Finance and Accounting.

An inquiry will then be made if the voucher has been received and processed for payment, after which the taxpayer will be informed on the date the check was cut and has been mailed to the taxpayer’s address.