THE Saipan Chamber of Commerce opposes House Bill 23-74 “in its present form.” Authored by Rep. Ralph N. Yumul, the measure would impose a 3% tax on construction activities that earn more than $250,000 in annual gross revenue.
However, the bill does not apply to construction revenues directly attributable to residential construction, and would expire three years after the effective day of its enactment, but not earlier than Dec. 31 of such year.
In his letter to Yumul, who is also the chairman of the House Ways and Means Committee, Chamber President Joe C. Guerrero said the business community understands the CNMI government’s need to increase its revenue. But the chamber also believes that revenue-generating measures “should balance the exigencies of the economy and level the playing field for CNMI businesses.”
Guerrero said due to the potential harm that H.B. 23-74 could pose for contractors in the CNMI, and a possible net reduction of revenue to the government, “we respectfully oppose this legislation in its current form.”
The chamber said since off-island contractors do not pay the business gross revenue tax, the bill would exempt them from the proposed construction tax.
“This would put all contractors in the CNMI at a severe disadvantage, causing many to not bid on lucrative federal contracts. The effect of this could reduce revenue for the CNMI and could even drive some local contractors out of business,” the chamber said.
It added that “this issue can be mitigated by the following mechanisms: a) Apply taxes based upon the value of the project, rather than the GRT of the contractor; b.) Provide a non-refundable credit for CNMI-based contractors equivalent to the annual amount paid.”
The chamber also recommended “enhancements to the licensing board to provide for a formal licensing of contractors and include language in the bill to apply the tax to licensed contractors.”
Lawmakers earlier said they would pass tax-hike measures to address the government’s budget shortfall and prevent further reduction of government work hours.
So far, no one has introduced bills to significantly reduce government expenditures.
