Pair of tax bills making their way through the Fono once again
The Senate on Thursday approved in final reading two Administration tax bills, which were part of a larger piece of legislation submitted last year, but vetoed by the governor after several changes by the Fono.
The two bills — changing the way the beer tax is calculated, and hiking the 5% miscellaneous excise tax to 8% — were the subject of a Senate Budget and Appropriations Committee hearing on Wednesday, where ASG Treasurer Uelinitone Tonumaipe’a testified.
The Senate version of the two bills, which were unanimously approved, now go to the House, where the House versions are pending in committee.
Currently, excise tax on imported beer and malt extract is 190% of the value, but under the Administration’s proposed amendment, the excise tax is 35-cents per 12 fluid ounces, or fraction thereof, of beer and malt container offered for sale by the importer. It basically means 35-cents per can.
Tonumaipe’a reiterated similar statements during the Senate committee hearing, as the reasons behind the proposed changes to taxing beer and malt extract. He said the proposal sets a flat tax rate similar to the current excise tax on cigarettes, no matter the brand of cigarettes. The flat rate for cigarettes is $60 a carton, he said.
For the new proposed taxing of beer, he explained, it's a flat rate of 35-cents per can, no matter the type or brand of beer. Under the current tax calculation, some beer cans are being charged 42-cents a can while others are 31-cents a can, he said.
Sen. Nuanuaolefeagaiga Saoluaga Nua asked how the government calculates the tax when it comes to large beer bottles — such as Vailima and Steinlager.
Tonumaipea explained that it all depends on how many ounces cited on the label of the beer bottle, and there is a calculation method in place. For example, if the beer bottle is 24 ounces, you multiply that by 35-cents per 12 ounces, amounting to a total tax of 70 cents.
Nuanuaolefeagaiga said the correct tax calculations should be in place when it comes to large beer bottles, and the government should be honest in ensuring that taxing is fair.
Asked by the committee about how much the government is estimated to collect on the proposed change, Tonumaipe’a said it all depends on the volume coming in. Under the current taxing system, ASG collects about $1.5 million just for beer alone. So if the volume of imported beer increases, revenue collections will go up as well, he said.
Introduced early this week in both the Senate and House is another administration bill, which seeks to increase the miscellaneous excise tax rate from 5% to 8%. The Administration points out that the current rate has remained unchanged for many years and is in need of updating and adjusting to address new economic realities.
Additionally, the current 5% rate is insufficient to meet the growing costs of providing critical government services, including medical, public safety, and others.
Of the total revenues collected from the proposed 8%, 75 percent goes to the general fund; $1 million earmarked for the scholarship fund; and the remainder shall be earmarked for repairs, renovations, and upgrading of all public school facilities and equipment beginning in fiscal year 2018.
It was noted during the Senate hearing that the Senate had increased the 5% to 8% when the large legislation was presented to the Fono during the last session, because it's easy to collect at the Port instead of the administration’s separate 7% sales tax legislation that was submitted at the time.
However, there were several changes made to the bill by the House, resulting in the entire legislation being vetoed by the governor.