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Govt opposes user fee reduction
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Posted on Aug 03 2005
The Babauta administration opposes the proposed reduction of user fee by 1 percent, saying it poses adverse impact to the government revenue collection.
Finance Secretary Fermin M. Atalig said during yesterday’s hearing held by the House Committee on Ways and Means that the passage of the bill would mean loss of some $6.5 million in revenues in fiscal year 2006.
This is on top of the projected 20 percent reduction in garment user fee beginning this year due to the worldwide lifting trade quotas.
He said the reduced rate would also reduce the FY06 projection revenue collection to $199.8 million from $206 million as reflected in the Babauta administration’s budget submission for the next fiscal year.
He said there could be an impact in FY05 depending on the date of implementation.
The government used to receive an average of $30 million a year in user fee.
Further, Atalig said in his testimony that the bill does not limit the reduction in fee to the garment industry but to any future goods manufactured for export.
Likewise, he said that while it reduces the government collections, its implementation would not stop the decline within the garment industry.
“Reducing the user fee at this time may substantially reduce government revenue while not impacting the rate of decline in the garment industry,” said Atalig, noting that the amendment of U.S. Tariff Code “may be more incentive for a portion of the industry to remain in the CNMI.”
The governor’s legal counsel Steve Newman echoed Atalig’s position.
He said that the congressional amendment would make the local garment factories more competitive.
The House panel is getting public comments on House Bill 14-325 which aims to reduce the 3.7 percent user fee to 2.7 percent amid difficulties facing the industry as a result of the worldwide lifting of trade quotas and the 50-50 percent value added requirement on garment products under the U.S. Harmonized Tariff Code.
The CNMI is lobbying the U.S. Congress to amend the law and reduce the requirement to 30 percent.
