Gov’t expects growth in excise tax collection

The increased vigilance against unscrupulous customs personnel and the slow recovery of the islands’ tourism industry are beginning to bear good fruits for the CNMI government, which expects significant growth in excise tax collection this year.

In fact, the CNMI Customs Division has projected that excise taxes collected from Northern Marianas-bound luxury items will exceed the $24 million level registered during the last year.

In the period covering the first 10 months of the Fiscal Year 2000, the Customs Division has already collected over $23 million in excise taxes imposed in several categories of Saipan-bound items.

Director Joe Mafnas previously blamed the major reduction in excise tax collection to the existence of corrupt customs personnel and the declining number of arriving visitors into the Northern Marianas.

In order to maximize efforts to replenish government coffers, Mr. Mafnas pledged to rid the division of corrupt personnel which virtually slowed down legitimate tax collection since these officers have allegedly connived with unscrupulous businessmen in the smuggling of imported items into the Northern Marianas.

Involvement of customs personnel in smuggling activities is believed the main reason why untaxed luxury items continue to flood the local market despite strict efforts by the government to curb such operations.

Collection of excise taxes started dipping in 1998 at $25.1 million from the previous year’s $33.5 million.

Government officials also attribute the dramatic drop in excise tax collection to the Japanese and Korean travelers’ weaker spending power primarily caused by the depreciated value of the yen and the won against the U.S. dollar.

A government report showed that the average excise tax quarterly collection fell to $4.9 million in Fiscal Year 1999, from $6.1 million during the previous year. In 1997, the CNMI government collected an average of $7.3 million in excise taxes per quarter, higher from the 1996’s figure of $6.25 million every quarter.

In order to boost revenue collection. the finance department is recommending a 10 percent uniform tax rate, as well as the scrapping of excise tax excluding tobacco, alcohol and personal commodities worth over $1,000.

This proposal was opposed by various sectors for fear that the replacement of sales tax with a flat rate would adversely affect the tourism sector which was then the highest revenue-earner among other local industries.

The Commonwealth’s coffers are not likely to enjoy any increase in excise tax collection following projections by the Japan Airlines that stabilization of the Japanese tourism market is expected to take place by not later than 2001.