KOROR, Palau (Palau Horizon/Marianas Variety, Feb. 6) – Government collections from its three major sources of revenue dropped by 7.7 percent last year compared to 2001 figures, according to data obtained from the Ministry of Finance.

Finance Minister Elbuchel Sadang said the total amount of revenue generated from taxes on gross receipts, salaries and wages, and general import in 2002 was $18.044 million, about $1.5 million less than the previous year.

Sadang said the government’s income from general import taxes, which include "sin taxes," declined by as much as 30 percent, or from $6.76 million in 2001 to $4.722 million last year.

He cited three reasons for the drop in the collection of general import tax: the worldwide economic slump after the Sept. 11, 2001 attacks in the U.S.; the Olbiil Era Kelulau’s reduction of sin taxes; and the relatively low number of construction activities in 2002 compared to 2001.

Sadang said the OEK’s decision to approve legislation that cut down sin taxes—duties collected from the importation of liquor and tobacco products—resulted in a decrease in revenue. He said the cut was about 50 percent of the original tax on alcohol and tobacco products.

The government, he said, collected $2.213 million in sin taxes, less than half of the total revenue from general imports taxes.

Import tax collections from general merchandise ranging from clothes to furniture and to vehicles totaled $2.505 million.

But GRT revenue increased by 8 percent last year compared to 2001. The government’s GRT collection in 2002 amounted to $7.451 million.

Taxes on salaries and wages, however, decreased by 1 percent—from $5.932 million in 2001 to $5.871 million in 2002.

Higher GRT revenue, Sadang said, indicated that sales in Palau picked up last year.

Moreover, Sadang said revenue from the three major taxes show a steady increase of government income since the country signed its Compact of Free Association with the U.S. in 1995.

In 1995, Sadang said revenue from the three taxes was pegged at $11.732 million, and it has increased steadily except in 2002. The peak of the eight-year period was in 2001.

Division of Customs chief John Tarkong Jr. said the total number of containers brought into the country last year was 3,952—a 40 percent increase from the 2,831 containers in 2001.

But Sadang said even with the increase in the number of containers, revenue from the import tax still decreased since most of the goods that came in last year were exempted from the excise tax.

He said government projects, food and medicine comprised the bulk of the exemptions.

Sadang said GRT remains the main source of government revenue.

The government also collects taxes on salaries and wages, hotel occupancy, vessels/cabins, road use, and amusement devices.

February 6, 2003

For additional reports from the Marianas Variety, go to PACIFIC ISLANDS REPORT News/Information Links: Newspapers/ Marianas Variety.

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