Fono reviews an 'incorrect' tax bill again — more ‘sin’ items
Rep. Samuel Meleisea has questioned the government’s claim that non-carbonated sugary drinks presenting a health hazard to local residents is the reason the Administration is moving to impose an excise tax on these beverages.
G.H.C Reid & Company contends that the proposed tax is too high for these beverages, a “heavier alternative” than carbonated sugary drinks.
When the ASG Revenue Task Force made its presentation last month to Fono leaders, some lawmakers, as well as the Chamber of Commerce early this month, it was announced that the proposed non-carbonated sugary drink excise tax is 15-cents per 12-fluid ounces.
ASG officials who testified last week in separate Senate and House committee hearings informed lawmakers of an error in the language of the bill. Instead of 15-cents, the administration's bill shows “fifteen (15) percent per 12 fluid ounce”.
The proposed new tax on non-carbonated sugary drinks, is among several provisions in current law that the Administration is seeking to amend, like gradually repealing the 5% miscellaneous tax, and changing the way excise tax is levied on imported beer.
In the bill’s preamble, the Administration claims that “non-carbonated sugary drinks present a health hazard to the people of American Samoa and imposing an excise tax on these products is in the public’s interest.”
During the House Ways and Means Committee hearing Tuesday on the bill, Rep. Samuel Meleisea pointed to the bill’s preamble, and read it aloud for everyone who was present, including the ASG witnesses: Treasury Uelinitone Tonumaipe’a, who is also vice chair of the revenue task force, and Deputy Treasurer for Revenue, Keith Gebauer, who is a member of the task force and current Acting Chief of Customs.
“Do you guys have scientific [data] to back that up?” Meleisea asked the witnesses. “I always thought that non-carbonated sugary drinks were a healthier alternative to carbonated drinks.”
Gebauer replied “We don’t have that in front of us. There is lots of research and study that show the hazards of sugary drinks, that is definitely part of it. Another part of it, when we included that portion, was looking at these categories as a whole.”
He added that “we can work to produce those” research and study results for the committee.
It was later in the hearing, that Tonumaipe’a responding to a question from another faipule, explained the error in the bill, saying that instead of 15% - as noted in the legislation - the proposed tax on non-carbonated sugary drinks should be 15-cents.
Tonumaipe'a believed the correct amendment had been sent to the Fono.
Then on Thursday’s Senate Budget and Appropriations Committee hearing, senators were also informed of the error and the committee wants the administration to resubmit the measure with the corrections.
Sen. Paepae Iosefa Faiai wondered out loud if the 15-cents wasn’t too high and suggested lowering the amount, although he didn’t give a number.
It was also at this same Senate committee hearing where Attorney General Talauega Eleasalo Ale, who is also the ASG Revenue Task Force chairman, noted problems in the language of the 7% sales tax bill. (See last Friday’s Samoa News edition for details.)
GHC REID's RESPONSE
In its letter to several lawmakers, G.H.C Reid pointed out the positive impact of the measure. For example, using per 12 ounce instead of “invoice cost allows even tax calculation for all non-carbonated sugary drinks; avoids avoid fraudulent invoicing; and aligns our tax calculation to the global community”.
However, the company says 15-cents “is too high”, adding that “this is now the same as carbonated beverages”. Furthermore, it “should be lower due to this category being the healthier alternative.”
Based on the proposal, the company noted that tax increases for non-carbonated sugary drinks such as teas will hike to 1035%; energy drinks up to 708% and juices to 768%.
“We DISAGREE on the proposed dollar value - 15 cents per 12oz - as this is too much. Our import volumes will drop by 30% which will have a cascading effect on the government’s revenue and result in layoffs,” said G.H.C Reid, which then proposed a 2-cent per 12 ounce tax “as an initial start to the amendments.”
During the task force presentation to Fono leaders and some lawmakers early last month, Talauega said the task force believes in enforcing laws when it comes to what they call “sin items” — such as beer and cigarettes, and the task force believes there is a big problem with high blood pressure and other types of diseases in the territory, and something needs to be done about imported goods such as soda and “sugary drinks”, which are being widely sold, with some arguing that this is not soda, so it's good to drink, it's juice — but most of these items, the task force says, are sugary drinks.
The task force is proposing to amend the 5% excise tax on “non-carbonated sugary drinks” to 15-cents per 12-ounces. They estimate that the current 5% excise tax collects about $93,244 annually but under the proposed 15-cents, the estimated collection is $1.9 million, according to data shown at the meeting.
Some business representatives told Samoa News that the task force has failed to take into account, what will happen if the proposed tax is enacted into law, and the retail price goes up, and the number of consumers purchasing these beverages drops.
“Less purchase means a drop in revenue collection for ASG and we’re back to the same problem again - government short on their revenue forecast,” said one business official, who only responded to Samoa News calls over the weekend on condition of anonimity. “We’ve all seen this before in other excise taxes - such as the soda tax, cigarette tax.”
Two other business representatives, after Samoa News shared what G.H.C Reid said in their letter to lawmakers, agreed with lowering the tax, due to these beverages “being the healthier alternative.”