“The bar industry in the commonwealth should be relieved that no further increases have been proposed for a sin tax that has remained unchanged for 13 years, instead of seeking an elimination of the tax,” the chamber said in a letter to House Committee on Ways and Means Chairman Ray N. Yumul, R-Saipan.
The bill to repeal the bar, H.B. 16-252, was introduced by Rep. Joseph C. Reyes, R-Saipan.
According to chamber president James T. Arenovski, the bill’s claim that “funds not paid in bar taxes…would…be spent in the local economy and likely result in additional taxable income” seemed questionable.
He said there should, at a minimum, be a finding on the real-world impact of the proposed tax elimination.
“How much does the current bar tax currently contribute to the commonwealth’s revenues?” he asked.
Arenovski said 25 cents in tax revenue to the general fund is worth more to the cash-strapped government than the tax yield of 25 cents spent in the local economy.
In his bill, Reyes said establishments licensed to sell alcoholic beverages for consumption already face multiple taxes and fees, which include the bar tax, the beverage container tax, the excise tax, the business license fee, the license fee to sell alcoholic beverages and the business gross tax.
These multiple taxes and fees, he said, hinder the economic development of such businesses.
Reyes believes it is advantageous to the CNMI if it repeals the bar tax to assist the “overtaxed industry” even it will result in revenue loss for the government.
Public Law 3-12 established a bar tax of 3 percent of the total charges for any beverage sold or consumed.
In 1995, Public Law 9-22 increased the bar tax from 3 percent to 10 percent and further provided that after three years, the tax will be 6 percent. In 1998, Public 11-25 set the bar tax rate at 10 percent.
