Mixed reactions from House members regarding business tax bill
Manu’a Faipule, Rep. Toeaina Faufano Autele is calling the Administration bill to propose a 1% alternative minimum business tax (AMBT), a “real business and economic development killer.”
Toeaina, an educator by profession, said the Tax Office has the right to audit businesses who are suspected of filing incorrect information on their annual income - a move to avoid them from filing their fair share of taxes to the government.
He said this bill will penalize businesses that have an honest loss, forcing them to pay a minimum 1% tax on their gross receipts, driving them further in debt and possibly out of business.
In the absence of the chairman of the House Ways and Means Committee, Rep. Lavea Legae'e Mauga, the chairman of the Budget and Appropriations Committee, Rep. Vailiuama Steve Leasilolagi chaired last Friday’s hearing to discuss the AMBT, which becomes effective in tax year 2018 if approved by the Fono.
Members of the ASG Revenue Task Force told lawmakers that the AMBT is to ensure that all businesses subject to taxation in American Samoa will pay their fair share of taxes, to help with the government’s financial woes.
Task Force member, Treasurer Ueligitone Tonumaipea, said the AMBT bill, as well as other revenue measures submitted by the Administration, is a proposal - a request, and the House makes the final decision.
Another task force member, Executive Assistant to the Governor, Iulogologo J. Pereira said he believes the bill is good for all businesses, especially those who have been operating in the territory for many years and paying less or no tax at all.
Rep. Gafatasi Afalava said he fully understands the difficulties faced by the government, but at the same time, does not want something that affects honest businesses, who continue to contribute to the economy. He told the task force that after his did his research, he found out that this bill will affect businesses who are honest with their loss, and those who are paying their taxes to the government annually.
Rep. Veevalu Meauta L. Mageo sought a clear explanation from the task force about how many businesses are paying their 1% tax to the government annually - and how many are not.
Iulogologo said that over a 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.
Tonumaipe’a added by saying there are a lot of businesses that 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.
Rep. Manumaua Wayne Wilson said he fully supports the bill, because this is another solution to the government's financial problem. He said he believes there are a lot of businesses who are providing incorrect information to the Tax Office every year, saying that they were operating on a loss.
“How can a business survive for a period of seven years if they operated on a loss each year? Something is wrong,” said Manumaua. “I believe this is the only move the government can make to stop the problem.”
Rep. Vaetasi Tuumolimoli S. Moliga told the task force that another way to help the government is to enforce the law in terms of collection, and also to monitor businesses that are suspected of providing false information to the government. He thanked the task force for these sorts of bills, which he said will allow all local businesses to come together and provide their share to the government.
Rep. Samuel Ioka Ale Meleisea said that while there are a lot of businesses in Tualauta District - he is not sure whether all of these businesses are honest in paying their taxes to the government. While he supports the motive of the bills, he recommends that businesses that truly suffer a loss, and non-profit corporations, be exempt from the business tax.
To follow up on the issue of "87% of businesses are paying less than 1% on the adjusted gross income," Mageo asked the task force if they ever conducted an audit to check on those businesses. Tonumaipe’a said yes.
“I believe the phrase: Leave no stone unturned," said Mageo, "If the government worked hard to avoid this ten years ago, this will not be a problem for the government today.”
After Tonumaipea repeated that all businesses subject to taxation in American Samoa will pay the proposed AMBT, Gafatasi wanted to know the specific types of businesses targeted by the AMBT bill. Tonumaipe’a replied that corporations are targeted under the AMBT, but not sole proprietors or partnerships. He said the bill exempts non-profit organizations, and new business operating within a two-year period, from the time it started, will not be subjected to the AMBT.
Towards the end of the hearing, Vailiuama said auditing business records is the only solution to the problem.
The committee will call another hearing soon, to hear testimony from the private sector.
In addition to Tonumaipe’a and Iulogologo, also present during the hearing were Attorney General Talauega Eleasalo Ale, Budget Director Catherine Saelua, Acting Chief of Customs Keith Gebauer, and Port Director Taimalelagi Dr. Claire Poumele.