Proposed amendment to allow for deduction of paid salaries of non-citizens from GRT

“I will be introducing a rider in the upcoming budget bill to correct the oversight made under RPPL 9-18,” said Delegate Jonathan Isechal, Chairman House of Ways & Means Committee of the removal of the $5,000 non-citizen salary deductible from business gross revenue report before payment of taxes.

Bureau of Taxation and Revenue issued a notice last month to all businesses informing them that it will no longer be receiving tax filings that include the $5,000 deductible of non-citizen salaries.  It added that the study of current law shows that this language was only contained in the findings of the law but not in the law itself and therefore collecting taxes based on this language was not compliant with the law.

Delegate Isechal said he was the initial introducer of the proposed amendment under House bill 9-1-1, to amend Title 40, 1201 to 1204 by reducing gross revenue deduction for salaries paid to citizens to 50% and to allow 25% deduction of non-citizen salaries.

The bill went through two amendments in the House, two amendments in the Senate and President’s final version PDI, struck out all other amendments and kept only the road use tax.

HB 9-1-1, HD1 struck out deduction of 25% non-citizen salaries and included deduction of all paid insurance premiums to Palau National Health Insurance from gross revenue before payment of taxes.

HD2 struck out the deduction of 50% citizen salaries, maintained deduction of insurance premiums and restored the deduction of 25% non-citizen salaries.

Senate version struck out House amendments, included new section allowing tax payer to deduct up to $5,000 of salaries of non-citizens per quarter.  It also added an amendment to Road Use Tax.

President’s version PD1, removed all amendments except for the Road Use Tax but the legislative findings were not change to reflect the change in the bill and it was signed into law in November of 2013 as RPPL 9-18.

“The discrepancy missed both House and Senate legal counsels and I admit I should have looked at it closely but I intend to make corrections to it as soon as possible, which is through a rider to budget bill,” assured Delegate Isechal. (L.N. Reklai)