Little over 100 businesses will be affected by the new tax law – Palau Goods & Services Tax (PGST), come January 1, 2023, according to Minister of Finance Kaleb Udui Jr.
Only businesses making $300k and above will be required to register under the new tax law, PGST. “It is not the mom & pop stores or boat drivers that will be affected,” added Udui.
Businesses making $50k to $299,999 a year will still file using the same Gross Receipt Tax (GRT) system, but they have a choice and can choose to register with the new tax system.
Businesses making below $50k, such as makit and small mom&pop stores, will not pay GRT or PGST but only file their revenues and pay $100 per year or $25 per quarter.
Minister Udui assures that the new tax law will be implemented as mandated and that the Ministry of Finance is receiving assistance from Asian Development Bank, the Australian Government Tax office, Taiwan Government, the Philippines, and other partners to ensure the implementation is carried out and the ongoing support is provided.
Despite government preparations, most people are still confused about the new tax law and how it will affect them as consumers.
Minister Udui said that the “average person, a Palauan, won’t be affected by the tax reform. The burden of the tax will be shifted to the tourist.” The tax reform, he added, helps Palauans with low to middle income by giving them refunds.
Under the new tax law, Palauans making $15,000 or less a year can get their paid income tax refunded. Palauans participating in informal makit with income below $15,000 and are not receiving formal employment income are eligible to get 4% of their revenue from makit back as social assistance. If they are involved in formal employment, but their income plus makit revenue is $15,000 or less a year, they too are eligible for social assistance.
Still, some believe that the cost of goods will increase as a result of the 10% PGST and the 12% net income tax, and the locals will pay the burden of tax anyway.
Palau Public Utilities Corporation reached the same conclusion in assessing the new PGST tax on PPUC’s rates and overall operation cost. PPUC CEO Frank Kyota, in his letter to Olbiil Era Kelulau, said that the 10% PGST on PPUC’s tariff, the increase in fuel cost, and the 12% net profit tax would have a “very substantial adverse impact” on their customers. PPUC’s tax-exempt status is changed under the new tax law to be like any other business.
As the enactment date looms, concerns among the citizenry mount. “Can the enactment date be pushed back until the economy improves,” asked a local man, worrying that the cost would be too much to bear.
Minister Udui admitted they had not done the best job educating the public on the new tax law. He assured that they would come out this month with information to better inform the public.