Current revenue shortfall is at least $2.3M per month for government
A presentation last Thursday by the ASG Revenue Task Force to Fono leaders and several lawmakers revealed that the government is currently faced with a shortfall of at least $2.3 million to $2.5 million a month, to cover monthly expenditures. The issue was reiterated during the governor’s address at yesterday’s joint session of the Fono.
In his address, the governor said the shortfall will have to come from payroll cuts — referring to the reduction of working hours — 80 hours to 70 hours — for ASG employee’s whose salaries are funded by local revenues.
However, it should be noted that starting with the current pay period, ASG workers making $30,000 and less a year are now exempt from the reduction of hours, along with others such as medical professionals, teachers, contract workers and federal grant funded employees.
The current change was announced in a July 5th memo by Human Resources Department director Eseneiaso J. Liu. There was no indication of the exact savings that were achieved through the reduction of hours, or how much longer it will go on for those still affected.
The Task Force presentation last Thursday was made by chairman, Attorney General Talauega Eleasalo Ale, and described by Senate President Gaoteote Tofau Palaie as “very colorful” — at the Fono Guest Fale, to an audience that included Gov. Lolo Matalasi Moliga, some cabinet directors, and task force members.
It focused on the revenues the government needs to raise to cure a shortfall in current ASG collections, to cover its monthly expenses.
The administration’s proposed legislative agenda to be presented to the Fono, which convened yesterday to start the Second Regular Session of the 35th Legislature, includes new revenue measures — such as the 7% sales tax — as well as amendments to current tax laws.
According to the timeline presented by the task force, the 7% sales tax proposal will be submitted to the Fono this month, and if enacted into law, will start on or about Jan. 1, 2018.
Additionally, the sales tax law should also contain language repealing the 2% wage tax by Dec. 31, 2019 or sooner, depending on the sales tax performance. This same information was emphasized by Talauega and the governor to lawmakers.
According to task force data, the sales tax (if enacted into law) is estimated to collect $15.2 million for the remaining months of FY 2018 (which begins Oct. 1, 2017). Thereafter, it’s estimated to bring in $23.5 million annually.
After the presentation of the proposed laws was made, Talauega pointed out that government requires $10 million to operate every month, but the truth of the matter is the government is unable to secure that amount of money, during this time of the year, due to difficulty getting revenues — both at the local and federal levels.
Lolo said that as it stands now, the average government spending on a monthly basis, including the full 80-hours of work for its workforce as well as to produce and provide government services, is about $10.5 million per month.
However, Lolo said the government is able to collect at this time about $8.2 million to $8.3 million a month — which is a difference of about $2.3 million to $2.5 million.
The governor said ASG is presenting these new proposals because there is no where else to depend, but on our ourselves. He noted the loss of revenue, with the closure last December of Samoa Tuna Processors Inc., and the delay in federal funding.
“Many of the issues we are faced with today are beyond our control,” he said, noting that the proposed bills would help the government’s financial situation now and heading into the future. He again stressed that American Samoa has to depend on itself, and be less dependent on federal money.
During last Thursday’s presentation-meeting, House Speaker Savali Talavou Ale and Senate President Gaoteote Tofau Palaie, as well as other lawmakers who were present voiced their concerns over the enforcement of the proposed laws, if they are approved by the Fono. For example, there is still concern of the enforcement of collecting the 2% wage tax from local businesses.
Savali said all these proposed measures would not be successful in raising revenues for the government, if there is lack of enforcement when it comes to collections.
Lolo agreed that the problem faced by the government is enforcement. He said he has given the task force a recommendation that instead of repealing the 2% wage tax, it should be enforced. (This would be on top of the 7% sales tax.)
He said businesses file taxes after each quarter, but don’t pay this tax until later. The governor said he recommended amendments for an enforcement that once the taxes are filed quarterly by the business, the wage tax owed is paid, instead of waiting until the end of the year.
He said the Fono has the authority to make changes and amendments to the measure presented by the executive branch.
Gaoteote said the word “tax” is not a good word to the community and a lot of people dislike it. However, he said, the administration has presented proposals to help with ASG’s financial difficulties. He said the Fono will conduct their own review of the issue before moving forward. He also pointed to a lack of enforcement as the reason government revenues are lacking.
According to the Senate President, the task force had made a nice and “very colorful presentation” but the problem he sees as well as the question always raised in the past is, how good is the enforcement of collection?