Lolo seeks Fono approval of Alternative Minimum Business Tax

Blames 'creative accounting' and 'loopholes' for non-payment of taxes
fili@samoanews.com

Establishing a new one-percent Alternative Minimum Business Tax (AMBT) will ensure that businesses pay their share of taxes and not avoid them through creative accounting and loopholes, said Gov. Lolo Matalasi Moliga, who asked the Fono for approval of the proposed AMBT bill, “requiring businesses to pay a minimum tax.”

In his cover letter, which includes language of the bill, Lolo claims that many businesses in American Samoa have successfully avoided paying their fair share of taxes despite posting substantial revenues year after year.

“Sometimes, this is done through creative accounting,” said Lolo, adding that the bill is meant to even the playing field so that all businesses are paying a fair amount of taxes.

Additionally, the establishment of this tax is in the interest of the people of American Samoa “as they pay their share of taxes and are not avoiding them through creative accounting or loopholes.”

“This will ensure that businesses who are making money pay a minimum amount,” he said.

In the bill’s preamble, the Lolo Administration claims that an “alarming number” of local businesses have successfully avoided paying their fair share of corporate taxes despite posting substantial annual gross revenues annually.

“This practice robs the people of American Samoa and the American Samoa Government of much needed revenues to provide the services and infrastructure that allow these businesses to operate safely and profitably in the territory,” it says.

According to the bill, the 1% minimum tax applies to the business' gross revenues for the tax year, commencing with tax year 2018. Additionally, the taxpayer shall pay the AMBT if an amount equal to 1% of the gross revenue exceeds the regular tax for the taxable year.

“Regular tax” — means the tax imposed on the taxpayer by the Samoan Income Tax Act for the taxable year reduced by the credits allowable thereunder, according to the bill’s language.

It also states that businesses that start up during a given taxable year will be exempt from the AMBT for the initial taxable year and the following taxable year only. The AMBT does not apply to a non-profit corporation.

However, businesses that undergo reorganization will be subject to the AMBT regardless of the year of inception.

During the ASG Revenue Task Force presentation to the Fono early this month, the government said it estimates to collect about $2.3 million annually from the AMBT and the figure is based on historical data over a 3-year period.

Over the 3-year period, on average, only 13% of corporate tax filers paid over 1% income tax of gross revenue, leaving 87% paying less than 1% on the adjusted gross income, said Task Force chairman, Attorney General Talauega Eleasalo V. Ale, who added that this means there are many businesses, a lot of them have been operating in American Samoa for many years, but when they file taxes, they end up paying less than 1% or nothing at all in taxes.

With the Fono now in a four-week recess, the bill will be taken up in committees when lawmakers reconvene Aug. 21st.  In the Senate the bill is assigned to the Senate Budget and Appropriations Committee, chaired by Sen. Magalei Lolovi’i.

During last Friday’s Senate session, Magalei, through the Senate President’s Office, announced that he is seeking a financial report from the ASG Office of Financial Institution (OFI) on the amount of money that has been sent outside of the territory, through money transfer services such a Western Union.

Magalei is seeking to have the report available to the committee when the Fono reconvenes.

OFI, established by law more than a year ago, regulates all financial institutions in the territory, including but not limited to commercial banks, holding companies, credit unions, trust companies and retirement funds, consumer money lenders, money brokers, mortgage loan originators, collection agencies, money transfer services, debt settlement service providers and any ASG-owned financial and depository institution.

OFI is overseen by Commissioner, Robert Ho Chee, who was confirmed last year by the Fono.

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