Millions in back taxes that could otherwise remain uncollected are expected to flow into the government’s coffer once a tax amnesty bill that the House of Representatives passed on Friday becomes law. Taxpayers have only until Jan. 1, 2014 to avail of the waiver of penalties and interests when they settle their back taxes under the bill that is now headed to Gov. Eloy S. Inos for action.
“We are not forgiving taxes owed…the government, but only waiving the penalties and interests,” House Ways and Means Committee chair and bill author Rep. Tony Sablan (Ind-Saipan) told Saipan Tribune shortly after the measure’s passage.
By a vote of 18-0, House Bill 18-28, House Draft 1, Senate Draft 1 passed the House at 11:15am on Friday.
The bill now goes to the governor, who has been vocal about the need to pass revenue-generating bills to meet the government’s increasing obligations, especially to the retirement settlement fund that requires a $25 million payment from the government in fiscal year 2014 alone, on top of other public services, the restoration of the 25 percent retirement pension cut, and interest payment on defined benefit plan contributions, among others.
Sablan said there are two ways to gain from the tax amnesty measure—the back taxes that will be collected, and the multiplier effect.
“For example, businesses that were not able to pay their taxes and had to close can now settle their back taxes and hopefully reopen their business or expand their business, without having to worry about the penalties and interests. We have the potential of collecting millions in back taxes that we would otherwise not be able to collect,” Sablan added.
During the session, Sablan briefed House members about the Senate amendment to the bill, which basically excludes those who had already availed of the two previous tax amnesty programs.
The bill also underwent other changes since it was introduced. One of them shortens the program implementation, from the original proposal of up to Jan. 1, 2017, to only up to Jan. 1, 2014. The program expires on Jan. 2, 2014, if the bill becomes law.
“The committee members think that if the tax amnesty runs during a long period of time, people might wait for the last minute to avail of the program; whereas if it’s only for a short time, we would know right away how many and how much has been settled. This would also help the government in projecting revenues,” he added.
The bill’s proponents said a tax amnesty program is the “most cost-effective” way for the government to collect tax revenue during difficult economic times and one that is “better than writing off” debts to the government.
If this bill becomes law, this would only be the third time that the CNMI government will provide a tax amnesty. They were done in 2001 and 2005.
Under a tax amnesty program, penalties and interests on unpaid or unreported taxes are waived. However, they still have to pay the original tax liabilities. It allows taxpayers to voluntarily come forward and take action to comply with tax laws.
The tax amnesty does not apply to persons against whom a criminal or civil action has been initiated and is pending for any violation of CNMI tax laws or any person being investigated for fraud; any person who has been convicted of tax fraud; any person whose source of income is illegal; and any person who fraudulently files a special return under this Act.
The Saipan Chamber of Commerce has been opposed to any tax amnesty bill, saying erring businesses need not be rewarded, among other things.
Other bills passed
Besides the tax amnesty bill, the House passed three other bills on Friday. They are headed to the Senate for action.
They included HB 18-106, HD1, authorizing the use of a one-half inch net mesh to catch bigeye scad or “atulai,” and to allow net fishing for goat fish or “tiao” during their seasonal run on Rota. The bill, authored by Rep. Teresita Santos (R-Rota), passed by a vote of 17-0.
The House also passed by a vote of 18-0 Rep. Ray Tebuteb’s (Ind-Saipan) HB 18-4, HS1 at 11:06am. The bill allows the Saipan and Northern Islands Legislative Delegation to appropriate the Managaha landing fee.
Also by a vote of 18-0, Tebuteb’s HB 18-39 passed the House at 11:39am on Friday. The bill authorizes the assessment of parking meter fees, requires segregation of fees collected by senatorial districts, and authorizes local appropriation of those fees.
Members said it’s about time that the government makes use of the parking meters installed in the tourist district of Garapan years back but have since remained idle, to generate revenue for other tourism projects, among other things.