The majority of the 50+ members from the business community who attended the Chamber of Commerce meeting last Thursday at the Tradewinds Hotel conference room during which ASG Treasurer Dr. Falema'o Phil M Pili made a presentation on the proposed 5% gross receipts tax (GRT) on businesses and non-profit organizations were not in support of the move.

According to the presentation, this proposal of a new tax revenue generation approach has successfully been implemented in 26 US States and territories over the past several years.

GRT is a tax on the total gross revenues of a business, regardless of the source of revenue of a business or net income, and is similar to a sales tax but levied only on suppliers and merchants. (It is based on the dollar amount of sales before expenses deducted.)

The treasurer explained the GRT approach will reform the current corporate tax rate structure by initially reducing it by 30% and then it will be gradually reduced over a three-year period until all corporate taxes are completely eliminated, thus voiding any need for corporate tax exemptions for American Samoa. 

“A final part of the GRT plan is to replace the outdated 2000 Tax Table with a current US Tax Table for use by all American Samoa residents,” Falema’o said. He told the business community members that 50% of businesses are not paying any taxes while the other 40% are paying corporate taxes.

At the end of his presentation, Falema'o appealed to the business community. But a show of hands that was carried out revealed only two supporters while the rest expressed disagreement with the proposed GRT.

“We need $40 million dollars to operate this government… we need your help in making this happen. If you have a better solution on how we can generate this much money, we welcome your suggestions,” he said to those in attendance.

Chamber President David Robinson said following the presentation, “virtually there is no support of this GRT, in the private sector, judging by the comments we have seen.”

He noted that one of the issues is the feeling that the GRT is an increase of taxation and increase of responsibility, having to come up with funds when that the government’s responsibility.

“We don’t like it,” said Robinson. However, he added, what the business people would like to see is what was indicated some time ago that instead of GRT, try the VAT  (value added tax) so that it goes on in the end when someone is buying something. “That is a better solution," he said. “VAT is a far more equitable way for the government to look at raising money.”

Falema'o was unhappy with Robinson’s “negative comments” on the proposed GRT, saying Robinson should’ve waited and allowed those in attendance to comment on their own.

Dan King did not agree with the Treasurer's statement that with the GRT, the attraction for businesses into the territory would be high. King said that having a GRT would result in the opposite happening, meaning it would not attract investors but instead, scare them away.

Sepp Steffany said the government needs funding help, and he felt this was the easiest way to attain funding to help the operations of the government.

Francine Gaisoa voiced her support of the GRT, saying she agrees with implementing the GRT for three reasons: “The fact that businesses will not be exempted from this GRT, it’s a level playing field; the fact that it’ll repeal the 2% tax wage, it’ll be more money for the consumers and the end result is that corporate taxes will be zero.”

During the meeting, the Treasurer revealed there are $19 million in receivables that cannot be collected. He said they had to be written off because it was impossible to collect them.

Tom Drabble said the problem lies with the government — for not collecting the taxes and the lack of proper auditing.

Tax Office Manager Melvin Joseph explained in response to the comments that for the last six years, given the hiring freeze, the Tax Office could not hire any auditors and collectors. He noted however that since the new administration has taken over, the Tax Office will start hiring people to fill in these slots and collect taxes for the government.