GHC Reid: Proposed changes to port fees and AMBT discourage outside investment

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The Lolo Administration’s proposed hike in port fees and other charges will be passed on to the consumer, and such increases will further discourage outside investment, according to GHC Reid & Company’s Aug. 18th letter to several lawmakers, which outlines the positive and negative impacts of the proposed measure, based on the company's assessment of the Administration’s revenue measures already introduced in the Fono.

Samoa News has already reported on what the company has to say about the proposed 7% sales tax, changing the way the excise tax is charged for imported beer, and the new 15-cent hike for non-carbonated drinks.

PORT FEES

The measure gives the Department of Port Administration director the authority to review fees and charges every five years, and if necessary, initiate modification.  Among the many proposed hikes, the established license fees for master or engineer of boat carrying passengers, currently at $5 will increase to $8.50. (See Samoa News Aug. 10th edition for details).

In its letter to lawmakers, GHC Reid points out that the “Port fees will be passed on to consumers. They will be the ones to suffer and businesses are already struggling to make ends meet and keep people employed.”

Additionally, the proposed fee hikes will “further discourage outside investment” and the Port Administration director “shouldn’t be given sole discretion to increase rental rates every 5 years. That’s too subjective.”

Some business officials have already told Samoa News that the port fee hikes are expected to be passed on to them by the shippers and then it will be passed on to consumers, who “will again be burdened with new or increased taxes.”

According to the ASG Revenue Task Force, the government collects over $4.5 million annually under current Port fees and charges; but under the proposed hikes, the government is looking to collect just over $7.11 million per year.

ALTERNATIVE BUSINESS TAX

Another revenue measure being proposed by the Administration sets up a 1% alternative minimum business tax (AMBT), which the governor said will ensure that businesses pay their share of taxes and not avoid them through creative accounting and loopholes.

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

GHC Reid said that while it understands that this tax is “meant to make fraudulent companies pay their fair share in taxes, but why punish companies that file honest returns?”

“If a company truly suffers a loss, how can it pay 1% of its gross receipts? Whether it’s been in business for many years or just starting, there are years when the economy is difficult and companies suffer honest losses,” GHC Reid said, and suggested that ASG audit the companies that submit 'net loss’ returns year after year.

“Don’t punish everyone for the dishonest companies that should be audited and prosecuted to the full extent of the law,” the company continued.

During the ASG Revenue Task Force presentation on the revenue measures early this month to the Chamber of Commerce, some business representatives had raised the issue of a company, which “truly suffered a loss” but is forced to pay the AMBT.

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.

According to the bill, 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.

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