Tax increases eyed on individual and business gross revenues

A new proposal to increase individual and business gross revenue taxes by 0.3 percent to 1 percent, which a lawmaker says would have a “small” impact on the economy, is drawing opposition from CNMI businesses that include the 150-member Saipan Chamber of Commerce.

Items covered by the bill include the gross revenue tax imposed on every person, tax imposed on businesses engaged in agricultural produce and fishing, taxes on manufacturers and wholesalers, and taxes on banks, banking institutions, building and loan associations and other financial institutions.

Rep. Stanley Torres (Ind-Saipan), author of House Bill 17-212, which is expected to be introduced during a session planned for Friday, described his proposed gross revenue tax hike as having a “small” impact on the economy.

“For example, an increase in the maximum tax on gross revenue from 5 percent to 6 percent, if passed through to the ultimate consumer, would increase a $100 purchase to about $101,” he said.

But an accountant in one of the most established businesses in the CNMI, for example, said a 1 percent increase in gross revenue tax would mean an additional $10,000 in yearly tax payments at a time when the economy is businesses are slow.

Under the bill, these tax hikes should take effect on Oct. 1, 2011.

Richard Pierce, executive director of the Saipan Chamber of Commerce, said the business group is “absolutely, positively and without a doubt” opposed to “this attempt to generate revenue for government funding at the further expense of businesses and individual CNMI income taxpayers.”

“The Chamber is looking for ways to reduce the cost of living and doing business in the CNMI, not increase it. SCC will submit formal comments as soon as possible,” he told Saipan Tribune.

Torres said the government has already initiated programs to cut expenditures, including a 20-percent cut in the majority of the Executive Branch but he said the burden of adjusting to current levels of available resources should be shared by all members of the economy “and not placed on only one group.”

Torres is also the author of a controversial Saipan casino gambling legalization bill and the medical marijuana bill, among other measures.

Under his HB 17-212, the gross revenue tax for those earning between $5,001 and $50,000 a year will be increased from 1.5 percent to 1.8 percent.

Those earning between $50,001 and $100,000 will be taxed 2.4 percent instead of the current 2 percent.

Those with earnings of between $100,001 and $250,000 will be taxed 3 percent instead of 2.5 percent.

The proposal also calls for an increase from 3 percent to 3.6 percent in tax for those earning between $250,001 and $500,000.

From 4 percent, the tax will increase to 4.8 percent for those earning between $500,001 and $750,000.

Those earning $750,001 and above will also be taxed 6 percent instead of the current 5 percent under Torres’ bill.

HB 17-212 says the tax imposed on persons engaged in the business of producing agricultural products or fishing in the CNMI or its waters for dietary consumption will be taxed 1.2 percent instead of 1 percent if their yearly total gross revenue is over $20,000.

The taxes imposed on manufacturers and wholesalers will also be increased from 1.5 percent to 1.8 percent, of their annual gross revenue is $5,001 to $50,000.

Those manufacturers and wholesalers earning $50,001 or more will also see an increase in tax from 2 percent to 2.4 percent under the bill.

Taxes imposed on persons operating a bank, banking institution, building and loan association, or other financial institution shall be the greater of 6 percent instead of the current 5 percent of the net income earned by such institutions, or 3.6 percent instead of the current 3 percent of the total gross revenue of such institutions.

Lawmakers have tried but so far failed to increase taxes or impose new taxes in recent years.