House hearing focuses on collection of 2% wage tax
In the past, lawmakers have made claims that the government, through the Treasury Department, hasn't been consistent in collecting the 2% wage tax, which is paid by all wage earners.
The money is earmarked, under local law, for LBJ Medical Center’s operation and the off-island referral program.
At last Thursday’s House committee hearing, the issue surfaced again; and this time, it was House Speaker Savali Talavou Ale who sought a clear explanation from ASG Treasurer Uelinitone Tonumaipea.
Savali doesn’t believe there is a problem with collecting the wage tax - which will be repealed under provision included in the Administration’s proposed 7% sales tax.
Tonumaipea said there is no problem with collecting the wage tax from the employer, the American Samoa Government, and once the money is received it's transmitted to the hospital.
According to him, the problem facing the Treasury Department is the wage tax collected from businesses.
Tonumaipea explained that wage tax is filed when businesses file their taxes every three months and that’s the time Treasury determines how much in wage tax to collect from a business.
He said many businesses don’t pay upon filing the quarterly taxes but instead, they wait until the end of the year.
That’s why it's very difficult to collect and transmit the money to the hospital when it comes to the wage tax collected from businesses, he said, and reiterated that the wage tax collected from ASG employees is transmitted to the hospital on a monthly basis.
Tonumaipea's explanation comes at a time when the Fono is conducting fiscal year 2018 budget hearings and it's always during this time when there are questions raised by lawmakers on why the government is falling behind in collecting the wage tax to help the hospital, which is facing its own financial troubles.
Some lawmakers over the years have suggested repealing the wage tax, which they and others in government consider an unfair tax targeting only wage earners, but not residents who earn a living via other means.
Other ASG officials have said publicly that employees being paid cash under the table also don’t pay the wage tax.
The ASG Revenue Task Force estimates that $3 million is collected annually from the wage tax.
Under the hospital’s FY 2018 proposed budget, LBJ is forecasting $5 million to be collected from the wage tax, according to budget documents.