Excise tax collection rose 10%

In what appears to be a relief from financial upheavals, the CNMI government reported a landmark increase in the amount of revenues generated from excise taxes in the first three quarters of the fiscal year 2000.

A report on economic indicators prepared by the Department of Commerce revealed government earnings from excise taxes jumped 10.4 percent to $15.9 million in the January-September 2000 period from the previous year’s 14.4 million.

Government collection of excise taxes has been on an steady increase until the adverse effects of the Asian financial crisis fanned towards the Northern Marianas in 1998, when it took a record fall of 17 percent.

Statistics from the finance department disclosed earnings from excise taxes amounted $25 million in 1996. This figure soared 17 percent to $29.2 million in 1997 only to drop by as much as its previous leap to $24.3 million in 1998.

Declining revenues out of excise taxes has been reported since then. In financial year 1999, the levy category accounted for only $19.9 million of overall government earnings. That was the first time excise tax collection fell beyond the $20-million mark since 1996.

If the first three quarters of the fiscal year 2000 would be the basis, the Commonwealth government must be witnessing a slow economic turnaround since quarterly average collection started climbing from $4.975 million in 1999 to $5.3 million last year.

But customs officials said the increase is more of a product of increased vigilance against unscrupulous customs personnel and the slow recovery of the islands’ tourism industry.

In fact, the CNMI Customs Division has projected that excise taxes collected from Northern Marianas-bound luxury items will exceed the $24 million level.

In the period covering the first 10 months of the Fiscal Year 2000, the Customs Division has already collected over $23 million in excise taxes imposed in several categories of Saipan-bound items.

Director Joe Mafnas previously blamed the major reduction in excise tax collection to the existence of corrupt customs personnel and the declining number of arriving visitors into the Northern Marianas.

In order to maximize efforts to replenish government coffers, Mr. Mafnas pledged to rid the division of corrupt personnel which virtually slowed down legitimate tax collection since these officers have allegedly connived with unscrupulous businessmen in the smuggling of imported items into the Northern Marianas.

Involvement of customs personnel in smuggling activities is believed the main reason why untaxed luxury items continue to flood the local market despite strict efforts by the government to curb such operations.

Government officials also 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 US dollar.

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.