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Good news for beer importers (and beer drinkers): Governor vetoes beer tax amendment

Gov. Lolo Matalasi Moliga [SN file photo]
His vetoes includes the fiscal year 2018 supplemental budget

Gov. Lolo Matalasi Moliga says there are "several reasons" why he vetoed Fono approved legislation, which amends provisions of the current 5% miscellaneous tax.

He further noted in his Oct. 30th letter to Fono leaders, after explaining why had vetoed the bill that “it may be necessary to adopt cost containment measures not unlike those adopted in FY 2017 and we hope to the extent that it is necessary that the Fono will join us in our efforts.”

The Administration’s bill called for among other things, a repeal of the 5% miscellaneous excise tax over a period of time, establishment of a new non-carbonated sugary drinks tax; amends beer tax to volume, not value; and amends tax on importing secondhand items (such as used cars).

However, the Fono amended certain provisions of the bill including the hiking of the miscellaneous excise tax from 5% to 8%.

Samoa News understands that before the governor made the final decision on this legislation, it went through a review by the ASG Revenue Task Force, which recommended the legislation as well as four other revenue measures submitted by the Administration.

In his letter to Fono leaders, the governor pointed out that the revenue measures submitted by the administration “were intended, in a coordinated manner, to build a strong foundation for funding the cost of government operations and special programs in to the future.”

This included both revenue enhancement measures to shore up government finances and individual relief measures intended to put more spending dollars in consumer hands, he said, adding that collectively, the proposed bills were intended to be read in conjunction with one another and not as separate, stand alone proposals.

Lolo expressed appreciation to the Fono for their support in the administration’s changes to the existing secondhand items taxes and establishment of the tax on sugary non-carbonated beverages.

But, Lolo said in passing the measure — as amended by lawmakers — the “Fono failed to recapture sufficient revenues from the increase from 5% to 8% in the excise tax on miscellaneous items to offset the deletion of the proposed sales tax.”

(Samoa News notes that both the Senate and House have tabled for future consideration and review, the administration’s proposed 7% sales tax, which includes provision that repeals the 2% wage tax.)

Several earmarks from the proposed sales tax were not carried forward to the increased excise tax, or in the case of the earmark for repairs and renovations for schools, not spelled out clearly enough to avoid confusion, according to the governor.

“We are also concerned with this [excise tax] bill having an immediate effective date,” said Lolo, noting that the bill increases the excise tax “on our importers by 60% with no grace period for them with respect to goods already ordered or on the water. They should be given the opportunity to plan for the increased costs associated with the higher rate of tax."

According to Lolo, part of building for the future involves amending the individual tax tables to gradually put more dollars into consumer hands and therefore would see more dollars circulating in the local economy.

Samoa News points out that the Senate had already passed its version of the administration’s bill amending the individual tax tables over a period of time but it is pending in a House committee, along with the House version.

“The Fono by not acting on the tax tables proposal has not addressed an important part of the entire revenue package, as more dollars circulating in the community will drive an improved gross domestic product which will be good for the private sector,” he said, adding that this is the same situation with repealing the 2% wage tax, which the Fono included as a provision in the miscellaneous excise tax bill amendments.

Lolo points out that without additional sales tax revenues, repealing the 2% wage tax cannot be sustained.

Having been through public hearings and having heard objections of members of the public and some lawmakers, Lolo said, “We believe the time has come for the administration and the Legislature to try to work collaboratively on addressing the territory’s financial future.”

“While the short-term outcome of our revenue enhancement initiative has resulted in this veto, I look at where we are as being at the beginning of the process of getting us to where we want to be,” he said.

Also vetoed by the governor, is the fiscal year 2018 supplemental budget, which the governor says is necessary after he vetoed the excise tax bill.

Lolo explained that the supplemental appropriation requires a sufficient revenue stream to support the proposed expenditures, which “we do not yet have, and will not have, absent further action on enhancing the government’s overall revenues.”

He acknowledged that the Fono has taken steps in the right direction by approving two measures, which were signed into law Oct. 30th — hike in port fees and charges; and establishment of a 1% alternative minimum business tax.

However, he said, “there remains more to be done” and the Administration looks forward to working with the Fono.