FY 2018 Basic Budget introduced in the Fono yesterday
Gov. Lolo Matalasi Moliga has revealed that excise tax collection on cigarettes “took a dive” in the current fiscal year because of contractual issues with off island vendors and market contract forces, but they’ve since normalized; and that funding has been committed to “beef up” revenue collections, especially in light of the five new revenue measures, if passed.
The revelations were made in Lolo's cover letter accompanying the American Samoa Government’s $395.26 million fiscal year 2018 budget proposal, which was officially introduced yesterday in the Fono and assigned to the respective committees in both the Senate and House for review.
Besides the FY 2018 budget, which is 90% of the approval budget for FY 2017 — dealing with local revenues — the Administration also submitted a Supplementary Budget, which is 10% of the approved local revenues for FY 2017.
It's unclear at this time when the Supplemental Budget, funded with five new revenues measures pending in the Fono, will be introduced in both Fono chambers.
(Samoa News notes the introduction will probably await the passage of the revenue measures, as the governor has noted that without them, the Supplemental is “invalidated”.)
Senate President Gaoteote Tofau Palaie informed senators on Tuesday that he is waiting for House Speaker Savali Talavou Ale to return from an off island trip to discuss hearings for the FY 2018 budget, along with the chairmen of the Senate and House budget committees.
FY 2018 BASIC BUDGET
For the FY 2018 Basic Budget, local revenues total $96.81 million, with taxes providing the largest funding source for the local government. ASG is projecting to collect $61.58 million on taxes for the new fiscal year with:
• Corporate taxes $11.80 million ($15.14 million FY 2017)
• Individual income tax $25.28 million ($25 million FY 2017)
• General excise tax $19.50 million ($23.50 million FY 2017)
• Soda tax $3.50 million ($2.50 million FY 2017); and
• Military cover-over tax $1.50 million ($1.40 million FY 2017)
In his letter to the Fono, the governor wrote, “Excise tax collection on cigarettes took a dive in the current fiscal year due to pending contractual issues with off-island vendors including constraint market forces that are beyond our control.”
He continued, “Imports on cigarettes have slowly become normalized as outstanding issues work” themselves out.”
For several weeks earlier this year, smokers in the territory had to resort to other cigarette brands, including a new brand that surfaced (USA Gold), after popular brands like Benson and Kool were nowhere to be found.
During the shortage, some stores were selling cigarettes between $11.95 and $13 a pack, some as high as $14 per pack.
In his letter, the governor informed the Fono the newly appointed deputy treasurer for revenue, referring to Keith Gebauer, has a plan incorporating a process for better enforcement and especially to support the Administration’s five new revenue measures now before the Fono.
“Passage of the new revenue measures will create sustainable revenue streams to fully fund our government’s critical needs for FY 2018 and beyond,” the governor explained. “In addition, to strengthen our revenue base, funding has been committed in 2018 in an effort to beef up revenue collection."
(Samoa News should point out that the governor did not explain exactly what the “beef up” effort for revenue collection entails, but Samoa News was told it probably means hiring more people for better collections.)
For corporate taxes, Lolo said it's expected to be weak in FY 2018 “due to uncertainty in business market conditions, and partly because most businesses have better bookkeeping of their goods and services, taking advantage of available loopholes to legally pay less in taxes.”
Regarding revenue from individual income taxes, Lolo expects it to be consistently in line with previous years.
For the soda tax and military cover-over tax, Lolo said they are projected to be slightly higher, compared to the previous year, mostly driven by increase in preferential choice demands in the marketplace.
LICENSES AND PERMITS
For this local revenue source, ASG is projecting to collect $1.5 million in the new fiscal year — an increase of $200,000 from the current fiscal year. Lolo said revenue collections are expected to be slightly higher in FY 2018 due to businesses obtaining licenses and permits, for the most part, to move their projects forward.
“It is anticipated that the actual revenue collections will exceed the normal levels due to numerous major economic activities implemented by the private and public sector,” he said. “Policies set by the government to better monitor the registration of new businesses will increase revenues under this revenue category.”
FEES & FINES
Under this local revenue category, the government is projecting to collect $4.5 million in FY 2018 compared to $5.2 million approved in FY 2017.
“Although revenue is slightly lower than the previous year, revenue stream is trending steadily upward as immigration revenues sustain good collection on the number of individuals being processed,” the governor explained. “It is expected that this trend will continue as stated policies continue to take hold, yet resolving long overdue challenges while diminishing backlogs.”
CHARGES FOR SERVICES
Charges for services revenue stream is forecasted at $6.6 million, which is slightly lower than the $6.7 million in FY 2017.
According to the governor, potential port activities will remain steady, given the restraints in fishery regulations, restricting the frequency of inbound and outbound vessels within territorial waters and beyond. Activities for cargo vessels are expected to steadily increase.
“As new revenue initiatives continue to gain traction, it will result in sustainable revenue streams moving forward,” Lolo said.
The last three local revenue sources are Miscellaneous Revenues (projected at $2.8 million in FY 2018, compared to $3.85 million in FY 2017); Indirect Cost ($5 million for FY 2018 while $5.3 million in FY 2017); and Transfers-In ($14.7 million for FY 2018 versus $18.2 million in FY 2017). Specific details for these three revenue sources will be discussed during budget hearings.