AP NEWS
Related topics

Am. Samoa considers corporate tax replacement

August 26, 2013

PAGO PAGO, American Samoa (AP) — American Samoa is considering phasing out its corporate tax and changing to a gross receipts tax in an effort to make the territory less dependent on federal funding.

The territory’s Treasury Department is proposing a 5 percent tax on gross receipts for all businesses, including nonprofits except religious groups. The tax could collect up to $40 million annually, the department says.

Gross receipts tax is similar to sales tax, except it’s levied against businesses rather than consumers directly.

American Samoa Treasurer Falemao “Phil” Pili said if the tax is approved, the corporate tax would be initially reduced by 30 percent and eventually eliminated within three years.

Pili said the territory’s corporate tax rate is among the highest in the Pacific and is high compared with U.S. states and territories.

Gov. Lolo Matalasi Moliga has ordered Pili and his staff to give details to his cabinet directors but said he’s not yet convinced they should move forward.

Residents are affected no matter where taxes are levied, Moliga said.

“It doesn’t matter where we place the tax, the bottom line is they, the public, will be the ones to pay the taxes,” Moliga said. “When we have tax, the businesses will pass it on to the public.”

Pili said corporate tax revenue collections have been historically low. In data provided to cabinet directors, 80 percent of corporations paid less than 1 percent of gross receipts in corporate taxes, while 50 percent didn’t pay any corporate taxes at all.

“Too many businesses show losses on their tax returns, thus paying few if any taxes,” Pili said. “Under this proposal, all businesses pay their fair share of taxes and the (gross receipts tax) is a deductible item on their tax returns for businesses.”

The proposal also calls for repealing a 2 percent wage tax law that went into effect early last year and generates $3.5 million annually.

David Robinson, president of American Samoa’s Chamber of Commerce and a member of the governor’s Economic Advisory Council, said small businesses would be hurt by paying the taxes on top of a 5 percent excise tax before goods are imported.

He said the gross receipts tax would “put a very severe amount of pressure on small businesses to come up with that sort of funding right away.”

Moliga said he told the treasury to hold meetings on the proposal with lawmakers and the community, including businesses and college students.

“The government needs to find new ways to bring in revenues,” Moliga said. “The federal government has been generous to American Samoa for many years with funding and grants but that will not last forever and we need to be self-sufficient.”

The territory currently relies on the U.S. government for 87 percent of its support, mostly in the form of federal grants and other contributions that aren’t controlled by the territory, Pili said.

AP RADIO
Update hourly