TMO chimes in on proposed administration revenue bills
Locally-owned TMO company, has joined G.H.C Reid in opposing the proposed 7% sales tax, but if the government insists on such a tax, the companies suggest lowering the percentage to 2% as a starting point.
TMO vice president Gaisoa-Liulevaega wonders how the government would ensure that each and every business/store collecting the sales tax will turn in all that money, instead of submitting a smaller amount while the balance is hidden under the mattress or being sent off island.
Gaisoa-Liulevaega, along with G.H.C. Reid president Olivia Reid-Gillet, and South Pacific Distributors general manager Mike Tolmie appeared Tuesday before the Senate Budget and Appropriations Committee hearing on three of five administration bills in the Fono.
At the outset of the hearing, committee chairman Sen. Magalei Logovi’i emphasized to the witnesses to be completely honest with their testimonies in order for senators to get a better understanding on the impact these measures will have on their operations. Magalei mentioned that whatever revenue measures are proposed, it's the consumers that will be affected in the end.
Both Gaisoa-Liulevaega and Reid-Gillet not only provided written testimonies in Samoan, but also addressed the committee in Samoan, which is the official language used by the Fono - both the Senate and House - to conduct business.
In addressing the committee, Gaisoa-Liulevaega noted that the ASG Task Force, which came up with the revenue package, had a difficult task in coming up with these measures. She said revenues collected should also be inline with spending, and suggested that the task force come up with revenue measures as well as ways to reduce expenditures.
She commended the task force for their hard work, but said the proposed revenues are both good and bad.
For the 7% sales tax, which is implemented in many countries around the world, she agreed that such a tax would provide more money for the government, and it's a fair tax in which everyone pays. However, she said TMO’s concern is whether the government is 100% sure it will be able to collect and record the sales tax from each and every store in the territory that is required to impose the sales tax on goods.
For example, if there are 150 or 200 stores, how would the government guarantee that all of these businesses honestly collect from consumers, report all of the taxes, and then turn in to the government what’s owed.
She wondered - as another example - how the government would ensure that the business which collects $10,000 from the public in sales tax will report and turn over this money to the Tax office instead of reporting only $2,000 while the $8,000 is hidden under the mattress or sent off island. Such a practice, she said, would make things worse for the government, with more loss of money.
She recalled what the task force had stated publicly, that the government was looking at bringing in new computer systems as well as hiring new staff to deal specifically with the sales tax to ensure full enforcement of the proposed law.
She questioned the funding source for such project and said the answer is - the public, the consumer. And even if the government brought in a high tech computer system, will the government enforce stores to make sure that such a system is used every time a sale is made? And is there a Tax Office staff manning a store 24-hours to ensure full compliance?
She said it’s TMO’s belief that the government is able to collect more revenue with the excise tax, because it’s imposed on goods that enter the port before containers are released to businesses. She offered a possible option to the sales tax - possible increase of the excise tax from 5% to about 6% or 7% since it's collected at port before the goods are released to the businesses.
She said TMO calls for more research into the sales tax before a final decision is made. However, if the government still insists on such a tax, TMO suggests lowering it to start from 2% during a one-year trial period, to see if the government actually would get more revenues from such a tax.
On the Administration’s bill seeking to set up a 1% alternative minimum business tax (AMBT), Gaisoa-Liulevaega said TMO does not support the bill, because it's not fair to businesses that are honest in filing their taxes.
She said that in the last 10 years, TMO has honestly paid nearly $1 million in taxes that are due to the government. Furthermore, every year, TMO always pays its taxes, despite challenges and difficulties the local economy faces, as well as the many new competition - with stores starting out as a small retailer and later expanding to a wholesale business from containers on their compound.
She humbly asked the Tax Office to “please follow up on all these new businesses that have been in operation for the past 6 or 7 years but are still reporting zero income” on their gross receipt.
“How can that be - a business operating for many years and then claiming zero income and therefore can’t pay any taxes?” she asked.
She said TMO observes that stores are buying from wholesalers and that means they have a lot of money, and owners of these stories travel off island and send their money off island, instead of honestly reporting that money to the government and paying their fair share of taxes due to the government.
As part of her written statement, she said TMO, a locally owned Samoan company is honest in filing taxes year after year, but twice their records were audited by the Tax Office. She again called on the Tax Office to do the same to all stores.
As previously reported by Samoa News, G.H.C Reid supports the sales tax if it starts at 2% and gradually increases. The company argued that 7% is too high - which is higher than Hawai’i - and a high sales tax will result in a drop in consumer buying power, and volume of food will decrease.
Reid-Gillet reiterated the same information during her Samoan language testimony and she also noted that the sales tax needs to have a thorough and detailed 'Implementation and Enforcement Plan' for it to be successful.
She also pointed out that the 7% sales tax - if enacted into law - does not include other excise tax already established by law. She said the 5% miscellaneous excise tax being proposed to phase out by the administration does not apply to all excised products.
Additionally, repealing the 5% miscellaneous excise tax does not start until calendar year 2019, while the sales tax becomes effective next year - so that means it's a total of 12% tax to be paid throughout 2018 and this is a major burden to the community.
She explained that each product is imposed a different excise tax. For example, vehicles brought into the territory by G.H.C. Reid’s Samoa Motors pays a 10% excise tax and if the sales tax becomes law, that's a total of 17% in taxes.
She added that sales tax should include goods - such as cars and hardware products - purchased online and brought into the territory.
In the company’s written English statement (which also has a Samoan translation), G.H.C Reid said the sales tax and other taxes need to consider the general wage bracket income “for our people. Our minimum wage is $5 per hour. Where will the public fork out extra money to afford the high 7% sales tax?”
As for the new 15-cent tax for non-carbonated drinks (which is part of the bill dealing with the 5% miscellaneous excise tax), Reid-Gillet said the tax is too high and this is now the same with carbonated drinks. She suggested a lower percentage for this category, being the healthier alternative.
For the AMBT, the company doesn’t support it because it penalizes the few companies that are honestly paying their business taxes. “If a company truly suffers a loss, how can it pay 1% of its gross receipt,” it said, adding that there are years when the economy is difficult and companies suffer honest losses.
SoPac’s general manager said he supports his colleague’s concerns and suggestions raised in the hearing. However, the only tax he had issue with is the new method of taxing imported beer. (See Samoa News' Wednesday edition for details).