A little over $2 million dollars which was deducted for income tax and Social Security benefits from the recipients of the United States Pandemic Unemployment Assistance will be refunded back to them, reported President Surangel Whipps Jr. during the weekly press conference held this week at Ngerulmud.

“The US government has given Palau 30 days to provide a plan for refunding back the deducted benefits. If we don’t, Palau will lose the remaining assistance from the America Rescue Plan Act,” stated President Whipps.

Money deducted as income tax will be refunded by the Ministry of Finance but negotiation will need to take place with Social Security deductions. The Social Security deductions are beneficiaries’ benefits for their future retirement, and refunding the money is not as clear as the income tax refunds. Social Security deductions also included health insurance MSA.

Last year, people who filed and received financial assistance under the US CARES Act through the office of WIOA had their income tax and social security contributions deducted from the pandemic unemployment assistance they received.

Under Palau law, this assistance was considered an income and was assessed income tax and social security contributions.

The United States clarified recently that this was a benefit under US law and should not have deductions.

Nearly $20 million of Pandemic Unemployment Assistance has been disbursed to eligible persons. Percentages deducted from this money as tax or SS contribution will be refunded back to those beneficiaries.

President Whipps said that although this is good news for the people, it will impact the recently passed budget which did not account for the nearly $2 million new expenditure.

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