Governor supports revised construction tax bill

Gov. Arnold I. Palacios has vetoed the Senate-amended version of House Bill 23-74, a bill that would essentially impose a 3% tax on construction activities. Instead, Palacios has expressed his support for a revised version.

Last week, Palacios vetoed H.B. 23-74 House Draft 1, Senate Substitute 1; a bill that was introduced by Rep. Ralph N. Yumul (Ind-Saipan) over a year ago to impose an additional 3% tax to the yearly gross revenue that is directly derived from construction activities for a period of three years.

While he vetoed the bill, Palacios did express support for a new version of the bill.

The House of Representatives has since drafted a revision.

In a message to House Speaker Edmund S. Villagomez (Ind-Saipan) and Senate President Edith DeLeon Guerrero (D-Saipan), he said while he supports measures to increase revenue to sustain essential public services, there must be a balance.

“In this time of severe fiscal challenge for the Commonwealth, I support this measure to raise much-needed revenue to sustain essential public services. The Legislature’s conviction that this measure passes the cost-benefit analysis, in part by mitigating the strains construction activity imposes on the Commonwealth infrastructure,” Palacios said.

“H.B. 23-74 is insufficiently protective of the reliance interests of contractors, which entered into construction contracts prior to the bill’s effective date. Retroactively imposing new taxes on vested contractual interest is unfair and may be unlawful,” the governor said.

Last week, the House passed a similar bill, H.B. 23-120, by an 18-1 vote.

Introduced by Villagomez, the bill states that the 3% construction tax would not apply retroactively to contracts awarded on or before Dec. 31, 2024, unless there is a change order that occurs after Jan. 1, 2025.