User fee collection plunges by $4M

The CNMI government collected nearly $26 million in garment user fees in fiscal year 2005, which is $4 million less than the annual average collection.

The Department of Finance said that from October 2004 to September 2005, the user fee collection reached $25.968 million only, representing a 14-percent decline from the FY 2004 collection of $30.1 million.

The decline in collection was mainly due to the worldwide lifting of trade quotas, resulting in the closure of four garment factories on the island and downsizing of operations of others. Mariana Fashions, Sako Corp., La Mode and Neo Fashion closed shop this year. Two more factories are believed to be closing down by end of this year. There are about 22 factories on island.

User fee is the tax paid by garment manufacturers on finished products for exports.

The fee represents 3.7 percent of the annual gross sales of the industry, which average roughly at $650 million to $700 million.

The government began seeing a dramatic drop in user fee collection in February this year, managing to collect only $2 million that month, followed by $1.831 million in April and $1.803 in May.

For FY 2005, the government made the biggest collection of $7.4 million during the first quarter, covering the months of October to December 2004. It received $2 million in October, $2.5 million in November, and $2.9 million in December.

During the second quarter, January to March 2005, the collection totaled $6.5 million. The government received $2.4 million in January, $2 million in February, and $2.1 million in March.

During the third quarter, the collection was down at $5.7 million. The collection totaled $1.83 million in April, $1.80 million in May, and $2.1 million in June.

In the last quarter, the collection was at $6 million. It collected $1.94 million in July, $2.2 million in August, and $1.96 million in September.

Before 2005, the government used to collect an average of $30 million a year or $2.5 million a month.

Finance said that the $26 million collection is “not as bad” as projected.

The department earlier projected to lose $6 million or about a 20-percent decline in user fee collection in view of the ongoing closures and downsizing within the garment industry.

The Saipan Garment Manufacturers Association predicted earlier this year that sales would drop by as much as 50 percent this year, which could mean a substantial decrease in user fee by up to $10 million.

The association had also projected that the government would lose about $35 million from the collapsing garment industry in FY 2006.

As the CNMI’s largest industry, the garment sector claims to support about one-third of the CNMI government’s revenue, while directly employing some 15,000 workers.

The garment industry reportedly contributes some $70 million in taxes to the government.