‘BGRT hike just a proposal; it’s up to Legislature’

Gov. Arnold I. Palacios said Thursday that he does not want to raise taxes, but he and Lt. Gov. David M. Apatang don’t have a choice but propose to increase the Business Gross and Revenue Tax in his fiscal year 2024 budget plan as they are looking to raise an additional $9.1 million.

“It’s a proposal. We need to get $9.1 million regardless—we’ve got to find $9.1 million whether it’s different fees, different types of taxes, new types of taxes, [or] suspension of rebates,” said Palacios at a press briefing in his office’s conference room.

Knowing the CNMI’s predicament gives them no other choice but submit to the Legislature a proposal for a.5% increase in the BGRT tax for certain brackets, he said.

Speaking before the Senate Fiscal Affairs Committee’s fiscal year 2024 budget hearing last July 14, Finance Secretary Tracy B. Norita said the administration’s proposed budget for the government’s operations includes a one-time increase in the BGRT beginning in the second quarter of fiscal year 2024 for an additional estimated revenue of $9.1 million. The proposed increase will only apply in fiscal year 2024.

Palacios said there are other possibilities and that he will leave that to the Legislature.

He said proposals to increase taxes have been submitted before when the economy and tax collection were in distress, so it’s not anything new.

“Contrary to what some people believe, it’s not hidden [nor] buried anywhere. That’s how it is. It’s a proposal,” the governor pointed out.

The other option, Palacios said, is what Sen. Celina R. Babauta (D-Saipan) had already stated—that they might have to take a look at the expenditure part.

“I have to make that difficult choice and sometimes you don’t want to do something, but you don’t have a choice,” he said.

Palacios said the other choices are direr and will impact more people—most of them vulnerable. One of those choices is to do away with the 25% pension payment to retirees, and that’s $13 million a year the government pays.

“But do I want to do that and impact our retirees who are dependent on that?” the governor asked.

He said the budget process is in the Legislature and he is still waiting for lawmakers to start doing what they need to do to figure out whether the proposed tax increase is something that they can support.

If not, Palacios said, then the lawmakers can come up with other proposals that could generate the $9.1 million.

“It is now up to the Legislature to take a look at that proposal and either tweak it, amend it, [or] do away with it and come up with another proposal. It could be a different proposal that generates the needed revenue or a different proposal to get rid of some of the expenditures,” he said.

The CNMI government’s fiscal situation has become so dire that just figuring out how the administration is going to come up with the money for the next payroll is keeping them up most nights, Lt. Gov. David M. Apatang said. “It’s not easy. So we have to come up with some initiatives,” he said.

He said they don’t want to raise any tax, but sometimes it’s necessary to go that way.

Even the U.S. Congress is always talking about taxes, Apatang said.

“We are just asking people to work with us. We are working very hard to ensure that we will fully recover, back to normalcy,” he said.

Under the governor’s proposal, businesses whose earnings range between $100,000 and $250,000 will see a .5% increase in their BGRT. Those that make between $500,000 and $750,000 will see a 2% increase, while those that make above $750,000 will see a 1% increase.

Based on the current BGRT schedule, the rate is 1.5% for business taxpayers that make between $5,000 and $50,000; for those earning $50,000 to $100,000 it’s 2%; above $100,000 to $250,00 is 2.5%; above $250,000 to $500,000 is 3%; above $500,000 to $750,000 is 4%; and above $750,000 and over is 5%.