Lower tax for cosmetic products eyed

Besieged with complaints that cosmetic products are very expensive on the island, the chair of the House Ways and Means Committee has vowed to study the possibility of slashing the stiff excise tax on these items to help lower their price in the local market.

Rep. Karl T. Reyes said the government stands to lose more revenues if it does not correct the existing duties imposed on cosmetic products, which include popular items as make-up, powder, hair spray and other consumer goods that have become necessity for personal hygiene.

At present, the Commonwealth levies 17.25 percent tax on every item brought into the island — a prohibitive cost that is added on the overall retail value of these cosmetic goods, according to the chairman.

“We will take a look at it and try to push for volume purchases more so than just per item. You are going to make more money for volume purchases by reducing tax on those area
category like invoice volume.”

The move followed clamor from vendors and dealers to lower the rate as they have to endure paying what the legislator considers a “heavy tax” on cosmetics which should not be included in the luxury items where excise taxes are normally higher.

According to the representative, CNMI has been left out in the competition for tourist dollars for these popular goods as Guam does not impose excise tax on cosmetics, leather goods and perfume.

“It’s a lot cheaper in Guam,” he explained. “If you are going to buy leather goods, it’s cheaper to fly to Guam and buy it there and comeback than buy your leather goods here. (The savings) will pay for your airline tickets. That’s why we are not competitive.”

Reyes raised question that while the CNMI government collects these taxes, it is likely that it is losing more because purchase of the cosmetics has slackened in recent years due to the economic crisis gripping the island.

“(The proposed cut) will affect the revenue collections of the government because we have been living with that kind of tax ever since. If they are taxing me 17 percent on cosmetics, and I want to double purchase of that, I will probably just buy one,” he said.

“If you go with lesser amount in taxes, it might force me to double my purchase. It would be better than 17 percent if they buy two instead of one,” added the legislator.

The government must consider the practice of some consumers to buy in volume when offering a drastic reduction in the tax rate so that it would encourage buying and help spur the local economy.

“The volume is very important when it comes to purchasing,” Reyes said. “We should lower the tax either going by volume per ounces or just per item by category like invoice volume.”