Chamber wants further review of tax bill

Saying it cannot support the proposal seeking to simplify the CNMI tax system in its current form, the Saipan Chamber of Commerce has asked the House Ways and Means Committee to further review the bill.

However, the Chamber supports the creation of a Tax Task Force composed of representatives from the Treasury, Revenue & Tax, Department of Commerce, tax practitioners, private associations, Chamber, administration as well as the House and the Senate.

A budget must be provided for the administrative support required to initiate, maintain and disseminate information developed by the task force, said David Wiseman, co-chair of the Chamber’s Government Relations Committee.

According to Mr. Wiseman, the Chamber does not believe that HB 12-232 will be able to meet its main purpose which is to simplify, enhance fairness and preserve the current tax level collected.

In fact, based on the overall calculations of the Chamber, there would be an overall decrease in the tax collected by the CNMI government once the bill is passed, said Mr. Wiseman in a letter to Rep. Antonio M. Camacho, chair of the House Ways and Means Committee.

“There would also be a shifting of tax collected from higher income earners to lower income earners. Lower income earners would pay a significantly higher amount of tax and yet the net yield to the CNMI Treasury would be less than the current tax system,” said Mr. Wiseman. He added that the Chamber does not support the additional tax burden on low income wage earners.

The Chamber recommended an improve data collection and economic forecasting method in the CNMI. Guidelines must be in place to establish certain thresholds that would limit the types of changes that could be made to the CNMI Tax system.

Mr. Wiseman cited that a new tax system must produce as much revenue as the old (IRS) system over an average of the two or three prior years (before the introduction of any new system). He said the IRS could assist in drafting such guidelines.

The Chamber also expressed concern on the specific rate changes on excise tax. Under the bill, soft drinks are to be taxed at the special rate while the Chamber recommends that soft drinks be taxed as foodstuff at the 1 percent ad valorem.

As it is, soft drinks are already expensive in the CNMI because in addition to the excise tax of $1.44 a case of 12 fl. oz. cans, there is another container tax of 5 cents per container or $1.20 a case and a BGRT tax of 2 percent or $0.20 a case. The total tax of $2.84 is being passed to the end consumer.

Mr. Wiseman said the Legislature should consider amending the tax on soft drinks to 1 percent ad valorem and possibly eliminate the container tax.

If the Legislature is to change the general tax system, it should look at the negative results including impression of instability to outside investors and possible disruption to the operation of businesses already established in the CNMI.