An estimated $2 million in taxes are lost from unregistered informal lodging inns called “bed and breakfast” in the CNMI, according to Saipan Chamber of Commerce board member Alex Sablan during talks between the Chamber and House of Representatives members last Monday on Capital Hill.
With zero tourists from China entering the islands, the Chamber has proposed, as an interim, to do some “house cleaning” to make the CNMI more competitive, as well as to keep the economy fueled as much as possible, and the Chamber believes that should include taxing these informal B&Bs.
“We think that there are over 400 to 600 facilities in this Commonwealth that are not paying their fair share of taxes and are not competing on a fair level playing field,” Sablan said.
In citing the drop in hotel occupancy taxes despite the tourism numbers holding steady, Sablan said that “there’s an obvious scenario going on” where B&Bs are impacting the tax base. Implicit in the suggestion is for the government to investigate and look into this tax loss.
“… this is what we need to do in this timeline when we have time to go after this kind of stuff, and really determine how we close the tax holes and loopholes,” Sablan added.
Tax amnesty talks
The Chamber also briefly touched on tax amnesty, with Sablan saying the group has always disagreed with the idea of having a tax amnesty.
“I think there’s the ability for people to come in and negotiate with Department of Finance and Tax and Revenue to get a good payment plan in place, but to just do across-the-board tax amnesty…sends the wrong message to taxpaying people that are not tax absconders,” he said. “When you get to the point of having to do tax amnesty, those are [for] people that are absconding on their responsibility as citizens of the Commonwealth…”
$33M tax collectible
Rep. Edwin K. Propst (Ind-Saipan) reminded that the government has yet to go after the $33 million in corporate taxes that is allegedly owed by Imperial Pacific International (CNMI) LLC.
“Here we are, talking about tax amnesty, going after the bed-and-breakfasts, and ensuring these taxes are paid and other things when we are looking at so many millions of dollars that we never ever collected, and there’s not even a pay schedule, $33 million in owed corporate income taxes by the casino that was never paid,” Propst said.
This is on top of the $37 million the casino owes under its contractually obligated community benefit fund. IPI is set to pay the CNMI government $18.17 million in the business gross revenue tax they owed by the end of March. It is a settlement from the original $30 million, which translates to about a $12-million loss for the CNMI.
“We’ve been giving them carte blanche and a golden ticket to not paying taxes when they should be paying taxes, when small businesses across the Commonwealth are struggling to keep the doors open,” Propst added.
The legislator stressed that there has to be a schedule and collection of payments. “It is something that we need to keep in mind when we move forward, because we’re talking about $2-million loss in bed-and-breakfasts, and so many tens of millions of dollars that we have never to this day collected.”