American Samoa Treasurer Supports Repeal Of Wage Tax

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2% tax meant to support ailing Medical Center, hurts low-income people

By Fili Sagapolutele

PAGO PAGO, American Samoa (The Samoa News, March 26, 2014) – ASG Treasurer Dr. Falema’o ‘Phil’ M. Pili says he has recommended to the governor to repeal the 2% wage tax, because not all wage earners pay their fair share, while LBJ Medical Center board chairman Mase Akapo says the tax is an important revenue source which helps LBJ with local matching funds for federal monies.

A bill to repeal the wage tax was introduced in the House last week, but no hearings have been scheduled yet, while there are only four days left in the current 3rd Regular Session.

At last Thursday’s Senate Budget and Appropriations Committee hearing discussing various money matters, Sen. Leatualevao Sosene Asifoa informed Pili — the ASG witness at the hearing — that this tax seriously impacts low income earners and their families, because additional money is taken out of their take-home pay.

Leatualevao suggested the Treasurer recommend to the governor to end the wage tax after 2014, because without repealing it, wages earners will continue to pay this tax for the next ten years or more. He also suggested the hospital come up with their own revenue to cover the void left behind if the tax is repealed.

Pili thanked the senators for raising this issue, saying the governor had spoken about repealing this tax in his State of the Territory Address to the Fono in January, because not every income earner is paying the tax.

He also said that he and his staff had conducted a review of the tax and found that "it’s not a fair tax" because not all wage earners pay the tax.

For example, he said, independent contractors, such as those with a consulting service, "are not even paying the 2% wage tax... so only a few of us are paying the 2%" and "this is my major concern with this tax."

The Treasurer said his recommendation to the governor is to repeal this tax and look at other ways to collect revenue, to ensure everyone who earns money pays their fair share.

Then at yesterday’s Senate LBJ/Health Committee hearing, Leatualevao told Mase and LBJ chief executive officer Joseph Davis-Fleming that the hospital should find other revenues to help them, because the 2% wage tax is taking away money from low income families.

At least there are tax refunds received by workers, when it comes to the regular American Samoa minimum income 4% tax, he said.

"Do you still need the revenues from this tax?" he asked Mase, who responded with a "yes".

Mase said this local revenue is very important because it's used as matching funds for the federal Medicaid program as well provisions of the Affordable Care Act (ACA), or the Obamacare program.

Sen. Galeai Tu’ufuli informed Mase of the House bill to repeal this tax and that the hospital should be aware of such a move pending in the Fono.

The House bill seeks to repeal the tax by the end of the current fiscal year on Sept. 30, 2014. The bill’s three sponsors — Reps. Larry Sanitoa, Taotasi Archie Soliai and Vailoata Eteuati Amituana’ i— have argued that the wage tax "is detrimental to our low income families".

Furthermore, LBJ is now receiving over $18 million in local revenue — which does not include the wage tax. (See Samoa News edition of Mar. 21 for more details on the lawmakers joint statement)

Lawmakers are now seeking support from the private sector, with an email message late last week to local Chamber of Commerce chairman Lewis Wolman, who then informed Chamber members about the bill and noted a call by the bill’s sponsors for support from the business community.

Samoa News reported on Monday, this week, about the Senate hearing on the 2% tax, which included Senator Soliai Tupine pointing out to the Treasurer that in the report from the government about the 2% tax, there are three checks with the same check number of "698747", all issued on Jan. 3, 2014, for different amounts.

Pili’s explanation of this was: "When there are times they miss making the payments, they then issue several checks to cover the missing payments to the hospital, so they will account for every pay period."

Soliai responded: "The more he explains, the more I’m confused."

Samoa News received an email, yesterday, from an audit operations manager in the U.S., who wrote: "FYI, with regard to the multiple payments with the same check number, my guess is that there was a single check issued in the amount of $194,136.96 to cover ASG 2% withholding from ASG employees for three pay periods. If you look at the check stub you will probably see a breakdown of the withholding amounts for the individual pay periods.

This works the same for any vendor with multiple payments. For instance, if there are 4 invoices processed for payment to [a vendor], there would be only one check issued for the total amount. However, you would see in the system, 4 individual payments with the same check number."

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