‘This is the right time to do it’

“When would the right time be?”

This was the question posed by Gov. Arnold I. Palacios when addressing the Senate-amended version of House Bill 23-74 to essentially add a 3% tax on construction activities.

The bill was forwarded to the Office of the Governor over a week ago with Palacios expressing that he intends to sign it.

Previously, Senate President Edith DeLeon Guerrero (D-Saipan) raised concerns about whether this is the right time to implement a tax hike explaining that this bill would negatively impact local construction businesses who are also struggling during this trying time.

In response, Palacios said he respectfully disagrees stating that now is the best time to implement a tax increase considering the current federal construction activity in the CNMI.

“I respectfully disagree with the Senate president when she said it’s not the right time to [implement this increase]. This is the right time to do that. We’re [seeing] major construction activities in the Commonwealth whether it’s through infrastructure that is federally funded [through] the Federal Emergency Management Agency, Community Development Block Grant Programs, and even projects funded by the U.S. Department of Defense. We’re talking very large investments in infrastructure through DOD, through [federal] infrastructure projects, and even the government’s own infrastructure projects that remain ongoing,” he said.

Palacios adds that these activities will not last forever.

“We’re not going to have these construction activities forever; this is ongoing now. If you want to capture this, this is the time to do it. Otherwise, that ship is going to leave. So, I respectfully disagree, it is the time, this is when it’s happening,” he said.

Using the garment industry as a prime example, Palacios said the government had an opportunity to tax the industry but argued for years and then, it became too late.

“For example, when we were dilly dallying on whether to increase the user fees for the garment industry, we argued about it for 10 years and then poof, it went away. The question then became irrelevant. So, to me, most of the projects are federally funded. Guam has got similar projects, and they implemented a tax hike last year because of all the buildup. So when would the right time be?” he said.

According to Saipan Tribune archives, last month, following nearly an hour-long regular session, the House of Representatives passed 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.

Authored by Yumul last year, H.B. 23-74 originally proposed to impose a 3% tax on construction activities with an expenditure threshold of $250,000.

The Senate Fiscal Affairs Committee increased this threshold to $350,000.

“It’s just not the right time…[to] impose taxes on the private sector” was the sentiment shared by Senate President Edith DeLeon Guerrero (D-Saipan) during a Senate session prior where House Bill 23-74, which would impose a 3% tax on construction activities, was passed.

Before voting on the bill, DeLeon Guerrero expressed that she believes it is not the right time to impose additional taxes on construction activities.

“It is not the right time to impose tax increases when we know that there are revenue activities being realized in at least one municipality here, Tinian, due to the military buildup. Tax increases will ultimately impact ordinary consumers, the people who are already suffering and can barely afford their family’s bare necessities,” she said.

DeLeon Guerrero further stated that raising taxes on a depressed economy, especially when businesses have yet to return to pre-pandemic levels, should not be the solution to the government’s lack of financial management and economic initiatives to generate fresh revenue to fund its programs.

“It’s just not the right time…[to] impose taxes on the private sector, which is the one producing revenues for the Commonwealth,” she said.

Lastly, DeLeon Guerrero said hopefully, from all of the revenues that will be generated from construction activities on Tinian, a supplemental budget can be submitted to the Legislature allowing them to address financial shortfalls.