Businesses welcome ‘no tax hike’ policy

Posted on Apr 21 2006

Business people heaved a sigh of relief yesterday after hearing directly from the Fitial administration that no tax increases would take place despite the fiscal quagmire that the government is currently in.

“It’s reassuring to hear the governor say that business taxes won’t be raised. We feel relieved. We truly welcome it,” said Saipan Chamber of Commerce president Charles V. Cepeda in an interview shortly after yesterday’s State of the Commonwealth Address.

In his first Commonwealth Address, Gov. Benigno R. Fitial said his administration would spare the private sector from tax hikes to ensure the continued flow of revenues.

“We will support the private sector in building the economy. We do not intend to ask more from the private sector by raising business taxes. More sales will lead to more taxes. Not more taxes on sales,” said the governor.

He said it is part of the goal of promoting the Commonwealth “as a community that welcomes serious and responsible investors.”

“This message is having results,” said Fitial, as he cited signs of rising investor confidence, including Duty Free Shoppers’ plan to expand its operations on Saipan, interests of casino investors on Tinian and other off-island investors such as Petron.

DFS is said to be investing an additional $20 million in the next few years.

Financial reality

Jerry Tan, president of Tan Holdings Corp. and chairman of the Marianas Visitors Authority, said the governor acknowledges the fact that revenues come from the private sector.

He said yesterday’s SOCA was very enlightening since the governor “painted a realistic picture of the government.”

“It’s my first time to look at the figures—deficit, expenditure, projected revenues and shortfall. I believe this is a very good presentation,” said Tan.

Tan was referring to Fitial’s report where he cited that the CNMI government is financially “broke.”

The governor cited, among others, that the government faces a $108 million deficit or up to $155 million in unreserved deficit, which keeps increasing since 1986.

Fitial also said that the government had been overspending prior to his assumption to office in early January this year.

He said that the government used to spend $21 million a month but his administration managed to trim it down to $17.75 million as of last month.

This month, the governor said he hopes to further reduce the monthly spending to some $14 million.

Fitial had also revised the annual appropriation of $213 million to $198.5 million for lack of revenues.

Wake up call

Triple J Motors general manager Jay Jones said the governor’s presentation and pronouncement that the government is broke is a “good wake up call.”

“A lot of people are not convinced of the economic situation. The governor stated very clearly that the government is broke,” said Jones.

Apparel factory owner Paul Zach said Fitial made “a great presentation.”

“Reality is reality. I’ve had an inkling of the situation but it’s my first time to see the figures. Now words and figure fit together. It’s not ‘pretty darn good’ as somebody said,” said Zach.

In the past two years, former Gov. Juan N. Babauta had described the Commonwealth as “pretty darn good.”

‘Govt is not broke’

Cepeda, for his part, said Fitial’s presentation showed “that we are in a very difficult situation.”

“But government is not broke. There’s still revenue coming in,” said Cepeda. “We just need to cut our expenses and come up with ways to boost our resources.”

House minority leader Arnold I. Palacios expressed a similar view. “The government is not broke per se,” he said.

Palacios assailed the governor’s “exemption” of businesses from possible tax increases.

“What he [governor] is saying is not feasible. There are two ways to overcome the situation—to cut expenses and raise revenues. We should do both. You can’t exempt one sector. He doesn’t want to raise taxes but the reason why there’s tax is to fund the government,” he said.

He said the governor should be looking at all areas such as reducing tax rebates, utility rates adjustment, and the like.

“Everybody got to share. We are all part of one Commonwealth,” said Palacios.

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