Lawmakers concerned over $10M shortfall projected for local revenue
Pago Pago, AMERICAN SAMOA — Based on ASG’s latest financial report for fiscal year 2021, the government is forecasting a possible shortfall of more than $10 million at the close of the fiscal year, but Treasurer Malemo Tausaga told lawmakers that he believes the shortfall will reduce as the Treasury Department implements collection enforcement because of the many businesses and individual who are believed not to be filing or paying their taxes.
These are some of the many issues revealed during day-one, on Wednesday, of the Fono Joint Budget Committee hearing for the final FY 2022 Budget which totals $552.78 million, funded with $110.16 from local revenue; $219.59 million in federal grants; $212.85 million under Enterprise Funds — which includes budgets for ASG’s semi autonomous agencies or authorities — and $10.26 million in Capital Improvement Projects.
Among the financial reports provided to the Fono by the Administration is the General Fund Revenue Report for the first-nine months — from Oct. 1, 2020 to June 30, 2021 — of FY 2021. It provides “preliminary and unaudited” financial figures as of July 20th on budgeted amount and actual collection.
The report shows that of the approved $110.16 local revenue budget for FY 2021, a total of $99.56 million had been collected through June 30th, forecasting a possible shortfall of $10.59 million by the end of the fiscal year.
During the joint budget hearing Rep. Larry S. Sanitoa pointed to this financial report, which shows that “we’re looking at a shortfall of $10 million for the current fiscal year.” He said local revenue projections for FY 2021 was one of several budget issues that the Fono raised concerns over last year.
“The truth is, there is no way we can collect $110 million” as budgeted in FY 2021 in local revenue, he said and noted that in all previous fiscal years, “the most, we’ll probably get is $98 million” in local revenue collection.
With a possible forecasted shortfall of $10 million, he asked what funding source the Administration is using to fund the new minimum wage increase for ASG workers for the rest of the current fiscal year.
The Tualauta faipule emphasized that lawmakers fully support the governor’s action to increase wages but points out that the approved FY 2021 budget does not have an allocation to fund the salary hikes that became effective July 1st.
ASG Budget Office director, Catherine A. Saelua responded that the funding source is unspent money already budgeted in FY 2021 for each department and office. She said there’s a lot of savings in the budget due to border-closure because of COVID-19 restrictions. And therefore, the travel budget has not been used in most cases and as well as salaries for unfilled positions already budgeted in FY 2021.
She used the Fono as an example, saying that with border closures, there’s a lot of funding available in the Fono’s travel budget, as only a small amount has been used. Additionally, there are also unfilled positions and that money can be used for salary increases.
However, Samoa News points out that Senate President Tuaolo Manaia Fruean informed senators last week that the Senate wants to hear from the Human Resources director whether Fono employees are included in the new minimum wage hike of $7.25 per hour — or about $15,080 annually — because there are several workers making much less than $15,000 annually.
On the funding source for the salary hikes, Gov. Lemanu Peleti Palepoi Sialega Mauga had told a cabinet meeting on June 25th that funds under Special Programs — administered by the governor’s office — will cover the pay hikes for the rest of FY 2021. (See Samoa edition July 1st for details.)
The question that has yet to be answered, and was also asked by Sanitoa during the joint budget committee hearing, is the total amount of funds required to cover the salary increases for the rest of FY 2021. The committee is looking to get specific details in the coming days.
Issues raised by Sanitoa were also echoed by other lawmakers, who remain concerned with the proposal for another $110 million-plus projection for local revenues and that ASG will not meet that goal.
Also present during Day-one of budget hearings, was ASG Treasurer Malemo Tausaga who explained that FY 2022 budget preparations for local revenues was forecasted based on the last three fiscal years as well as the revenues collected in the first-nine months of FY 2021. He acknowledged concerns from some lawmakers that $110 million budgeted in FY 2021 for local revenues will not be achieved.
However, he said he believes that by the end of FY 2021, the possible $10 million-plus shortfall forecast will be much lower — probably $2 million or $3 million. Additionally, the Treasury Department has taken necessary steps to enforce collection of revenues owed to the government by both businesses and individual taxpayers who failed to file taxes.
Malemo shared with lawmakers that when he took over as Treasurer in January, records showed many businesses not filing taxes or paying what they owe the government. For example, in 2018 the number of approved businesses licenses totaled 1,247 but only 731 of them filed taxes. And it was the same situation in 2019 and 2020 with more business licenses issued and many not filing taxes.
He also said that there are also many individual taxpayers who are not filing their taxes or even paying what’s owed to the government. For example, he noted some lawmakers present in the hearing who have not filed or paid taxes — but he declined to give additional information.
Now, he said, the Tax Office is enforcing collection of outstanding taxes for both businesses and individuals. Additionally, Treasury has a new policy in place in which the Commerce Department cannot issue a business license unless it verifies with Treasury that the business has filed and paid taxes from the previous year.
Another big revenue source for the government is leases at the Tafuna Industrial Park and Malemo said Treasury is enforcing collection of lease payments, saying that there are some tenants not paying their leases.
Malemo reiterated his belief that by the end of FY 2021, any shortfall on local revenue collection would reduce to about $3 million. And he apologized in advance to the Fono in the event that ASG is unable to collect all $110 million in local revenue for the current fiscal year.
As previously reported by Samoa News, the Administration’s Mid-Year Performance Report revealed that Treasury has “implemented a revenue collection working group to evaluate the collections and ensure all facets of cash collection points are maximizing the enforcement efforts.”
At the budget hearing, Sen. Togiola T.A. Tulafono said a Fono review of ASG reports found that the shortfall in FY 2021 for individual income tax is $12 million-plus. He sought an explanation to which Malemo responded that many taxpayers are not filing taxes or paying what’s owed in taxes.
However, Togiola pointed to companies having problems hiring workers while others have reduced their workforce, thereby impacting what the government has forecasted to collect in individual income taxes. He suggested that the government take this into serious consideration and also plan on how to address such a forecast shortfall.
StarKist Samoa, the largest private employer in the territory in May this year, reduced to one-shift a day as it was faced with a shortage of workers — an action that two lawmakers told Samoa News earlier this week is a major factor in the drop of individual income tax collections.
Joint budget hearings continue until Aug. 10th.