Tinian Shipping wants tax cuts • CPA asked to reduce passenger head tax to save company from closure

Posted on May 24 1999

Hong Kong Entertainment (Overseas) Ltd., has asked the Commonwealth Ports Authority to assist one of its subsidiaries, the financially beleaguered Tinian Shipping, by reducing the passenger head tax from $3.75 to $1 for the company staff for two years.

The request was made by Michael Kwan, chairman of Hong Kong Entertainment, in a letter sent to Roman S. Palacios, CPA board chairman as the company struggled to survive the effects of Asia’s financial crisis. In his appeal for assistance, Kwan said Tinian Shipping would find it difficult to operate the ferry service without the government’s help.

“Worst come to worst, if our company fell, it will directly affect at least 750 employees and their families. Most importantly, it would directly affect the tax revenue for all level of government,” he said.

Another option which Kwan proposed is for the ports authority to charge the $3.75 head tax only to paying passengers for two years.

Hong Kong Entertainment spent over $12 million when it acquired the two high speed ferries – M/V Tinian Express and M/V Saipan Express – to service tourists coming from Saipan to Tinian.

Unfortunately, the low tourist arrivals and reduction in international flight coupled with Asia’s economic crisis, has pushed the company into financial distress since its operation on May 1998. Every month, Tinian Shipping’s net loss is over $300,000.

Based on the company’s record, these ferries have carried over 20,000 passengers back and forth between Tinian and Saipan per month. However, over 50 percent of these passengers were local residents.

Tinian Shipping charged each passenger $15 for a round trip ticket from Saipan to Tinian. The passenger head tax of $3.75 had been included in the price of the ticket .

While they are willing to pay the head tax, Kwan said the regional crisis has greatly affected the expected revenue from the ferry, hotel and casino. Despite the company’s marketing efforts, tourist arrivals to the island-municipality of Tinian remain very low.

“As you are aware, our financial situation is so critical that we have missed our mortgage payments for the ferries,” said Kwan.

Debis Financial Services Inc., the company which financed the acquisition of the two vessels, has filed a lawsuit before a federal court for alleged non-payment of a $7.6 million loan. Debis has asked the court to turn over the two vessels to the company as payment for the loan.

Kwan said he has managed to make an out of court settlement to prevent the seizure of the two ferries which are vital to the service of Tinian and Saipan especially for Tinian residents who have considered the vessels as their main transportation system in going out of the island.

Earlier, Telesource CNMI Inc. has expressed interest in acquiring the two vessels but sources said company officials have already had a change of heart due to the huge debt it will inherit.

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