Jerry Kramer, CEO of Pacific International Inc., which just won a $27.5 million contract for road paving in Chuuk in the Federated States of Micronesia and is the largest construction company in the Marshall Islands, objected to a government plan to increase taxes, saying, “The government is not taking a holistic approach to working with its ministries and agencies to develop the economy. The government needs revenue to provide essential services but increasing taxes takes money out of the community. Growing the economy is the direction the government needs to go in.”
A government tax commission is proposing to raise income taxes for middle- and high-income earners, while adding a new apartment tax and revamping what is widely acknowledged as a poorly enforced business gross revenue tax system.
But Kramer said the key to increasing government revenue and improving life in the country is getting disposable income into people’s hands by creating jobs in the business sector, not raising taxes.
The Marshall Islands has lost close to $50 million in funding from Japan through lack of action, and another $40 million from the U.S. Federal Aviation Administration for airport improvements may be lost because of a law adopted by the parliament last year, which has created a roadblock for the U.S. agency. The law requires that any lagoon or ocean areas where land is created by fill — a key part of construction work in this land-poor atoll nation — becomes the property of adjacent landowners. The U.S. government says public money cannot be used for private gain.
“The Marshall Islands is eligible for a $6 million to $10 million annually in major infrastructure projects from Japan, but we haven’t had one project in five years,” Kramer said. A total of $30 million to $50 million has been available but Marshall Islands “hasn’t taken advantage of it.”
“A one-sentence change in the law can bring in $30 million to $40 million for construction work and jobs from the U.S.,” he said.
The European Union, Asian Development Bank and U.S. federal agencies have tens of millions of dollars available for a range of grant-related projects that are similarly not being tapped by government, he said.
The government sees funding for the Marshall Islands Visitors Authority as an expense, but Saipan and other islands see it as an investment, he said. “Tourism brings in money, revives the culture, creates jobs and is a market for handicrafts,” he said.
“There are other revenue sources,” he said. “If the right buttons are pushed to grow the economy we can get more money into the country.” One good way to shake loose grants available to the government from overseas donors is to hire good grant writers. “What would the addition of $30 million a year into the economy do for us?” he asked. “That’s jobs, spending money, and tax revenue.”
