AMID economic uncertainty and a labor shortage, the administration and some lawmakers are proposing and/or considering separate tax hike measures.
In a press conference in January, Gov. Arnold I. Palacios blamed the government’s financial crisis on the “misappropriation of public funds,” so “I don’t want to go out and raise taxes again and impose the penalty on the businesses and the people of the Commonwealth because of the misappropriation [and] misdeeds [of] government officials.”
On Wednesday, his Finance secretary, Tracy B. Norita, said they were proposing a “one-time” increase in business gross revenue tax.
For its part, the House Ways and Means Committee is drafting a bill that would impose a 3% tax on the gross revenues of construction activities in the CNMI.
BGRT
Norita said through a BGRT tax hike, they are hoping to collect $9.1 million in additional revenue.
She said they want the tax hike to take effect in January 2024.
Finance is proposing a 3% tax or a 0.5% increase from the current 2.5% rate on taxpayers whose annual gross revenue ranges from $100,000 to $250,000.
The proposed new tax for those making $500,000 to $750,000 annually is 6% or a 2% increase, and for those earning $750,000 and up annually, the tax hike proposal is 6% or a 1% increase.
There will be no increase in the tax rates of those earning $50,000 to $100,000, and $250,000 to $500,000.
“From this proposal we projected a $9.1 million increase in revenue,” Norita said.
She said this projection is based on the tax analysis prepared by the Division of Revenue and Taxation based on FY 2022 data.
Norita said they are also assuming that the affected businesses, “out of their best interest,” will not go out of business for one year to avoid paying the tax hike.
Sen. Celina R. Babauta suggested that the administration’s tax hike proposal should be in a stand-alone bill, and not incorporated in the FY 2024 budget measure because it could be a source of dispute between the House of Representatives and the Senate, and may delay the passage of the budget.
“If the House incorporates it and we reject it, we’re going to have to cut expenses,” she added.
Construction tax
Senate Vice President Donald M. Manglona asked Norita about the construction tax hike proposal, but the Finance secretary said, “No, that is not part of our proposal. That is in [another] bill that [would be] introduced.”
The stand-alone construction revenue tax proposal is similar to House Bill 23-30 which Rep. Roman C. Benavente introduced in March to impose an additional 5% tax on construction contractors earning $250,000 or more. The new bill would propose a 3% tax hike and would exempt revenue from construction activity intended for residential houses.
The new bill was discussed during a House Ways and Means Committee meeting on Wednesday, but it wasn’t clear who among the House members will introduce it.
