Fono passes revenue bills, supplemental budget despite uproar over port fees by private sector
The Fono has officially passed the Administration’s fiscal year 2018 supplemental budget after lawmakers reduced the total by more than $300,000.
Lawmakers — in both the Senate and House — endorsed two revenue measures from the Administration, as the Fono is set to close, at the end of business today, the 2nd Regular Session of the 35th Legislature.
The final supplemental budget bill for the Fono to decide on was the Senate version, which the House approved yesterday in final reading with one major amendment.
Total supplemental was initially $11.34 million but the House amended it down to $11.01 million after faipule reduced the Treasury Department’s allocation of $900,000 by $331,500 down to a total of $568,500.
Another amendment made by the House deleted the proposed sales tax as one of the five revenue measures proposed by the Administration to fund the supplemental. Both the Senate and House have opted not to move forward the 7% sales tax, which the administration was looking to collect about $24 million annually from.
Upon passage by the Fono and approval of the governor, the supplemental bill goes into effect immediately, according to language of the measure.
The Senate yesterday also gave final approval for the House versions of two administration bills.
One bill increases port fees and charges, which have not changed in 30 years. The Senate approved the measure in a 12-2 vote. The 'no' votes came from Sens. Levu Solaita and Fonoti Tafa’ifa Aufata.
The other bill establishes the 1% alternative minimum business tax (AMBT), and was approved by the Senate in a 13-1 vote — with Fonoti being the only opposing senator.
The only amendment the House made was deleting a provision which authorizes the Port director to review the fees and charges every five years. Lawmakers believe that one person shouldn’t be responsible for such a review, and executives of local businesses who testified or submitted written statements in both the Senate and House, agree.
However, private sector executives have voiced concerns over the increase, suggesting the increase be gradual. They argued that such increases would be passed on to consumers.
StarKist Samoa last week provided data on the impact of the proposal on its containers, which shows that under the current rate, the shipping line charges the cannery about $4.58 million annually. But the new proposed fees — if enacted into law —will result in additional costs of $328,140 a year.
According to the cannery, the proposed fees are an indirect cost to StarKist and this means the fee is assessed against the container vessels, who then pass on the cost to StarKist.
Also last week, Polynesia Shipping Services Inc., the local agent for Swire Shipping Co., provided a written statement and data of the impact of the new proposed fees and charges.
“Our preference is ‘no increase’,” Polynesia Shipping general manager Herman Gebauer said in the written statement.
According to him, shipping freight rates are depressed at this time with competition being “very aggressive” and rates are at 25% to 45% depending on the commodity — e.g. general cargo, reefers, etc.
“We do not have the ability to absorb any increase from port fees from the freight. If the proposed increases are applied, they will have to be passed on to the cargo owners importers/ exporters,” he explained, adding that the new costs will end up being passed on to consumers.
Polynesia Shipping also provided a separate data information sheet on the current port charges and fees on four container vessels that called into Pago Pago between May and July this year. The data included how much each of the container vessels will be charged under the proposed rates.
Gebauer noted that the port fees are not retained by port for spending on maintenance or to improve port infrastructure, saying that if an increase is applied, they would like to see this be conditioned upon:
• A firm plan including timeline for Port Administration to address existing infrastructure deficiencies — container yard surface, drainage, lighting etc.
• New revenue — or a percentage of total revenue — raised from the proposed hike be committed to fund future maintenance or upgrades.
• Publish a plan for future expansion to meet volume growth. For example, relocate the Port Administration building to near the main ECE center in Utulei or some other location.
Other private sector businesses have shared with lawmakers the need to allocate new revenues collected from the proposed fees for upgrades to the main dock, which they argue is congested and in need of major improvements.
Port Administration is calling a meeting today of port users at the Port Conference Room. Agenda items include the current proposed hike in port rates and fees; and container yard operations.
ASG Revenue Tax Force officials have publicly stated that only 13% of businesses pay corporate taxes while 87% don’t. The officials, along with the governor, have claimed that some businesses use loopholes in current law as well as clever bookkeeping tactics to avoid paying taxes every year.
Private sector executives who testified and submitted written statements to lawmakers argue that the bill punishes honest businesses that file their taxes annually and they urge the Treasury Department to use their authority to conduct audits of businesses.
They said the AMBT penalizes businesses that suffer legitimate losses during recessionary business cycles, natural disasters, and government regulations, and it will discourage new business development and discourage new entrepreneurs.