Another round of public education on the tax reform plan begins with a symposium held at the Palau Community College Cafeteria yesterday. The event hosted by Ministry of Finance and Palau Chamber of Commerce invited business people, experts, educators, public officials and general public to attend.
Tax reform, one of the development policies required under the concessionary loan terms with the Asian Development Bank, is not a new concept to Palau.
Kevin O’keefe, economist with Graduate School USA, said that having worked with Palauans for many years, the tax reform bill is not a new concept for Palauans but a policy that they have already been working on for years.
Ken Uehara, of Palau Appraisers and former President of Palau Chamber of Commerce said that he was part of the 2008 taskforce tasked to study the new tax reform plan.
Most agree that Palau’s current tax laws are outdated, inefficient and not conducive to economic growth. Current tax regime no longer fits Palau’s current economy and change must happen to create more transparent and fair tax system.
Not everyone feels that the proposed PGST (Palau Goods and Services Tax) is the best one. There are still fears and concerns that the new system will negatively impact businesses, especially the recovery from the impact of COVID pandemic.
The symposium attempted to address the concerns and invited local businesses and brought local experts as well as international experts to explain what the new tax reform means and its possible effects on businesses and Palau’s economy.
According to presentations made, without this tax reform, Palau’s economy, its government and its people are projected to suffer greater economic downturn, struggle with debt payments and face greater difficulties recovering from the impact of the Covid pandemic.
The proposed comprehensive reform overhauls the existing system, moving away from basic gross receipt tax to tax on final consumption of goods and services. It removes import tax, impose 10% goods and services tax, imposes 12% business income tax, make allowance for deductions for operating expenses, reduce income tax of wages over $8,000 from 12% to 10% and remove tax exemptions for food and medicine.
The bill cover taxes for financial institutions, excise and carbon tax and retains hotel room tax although to be reduce from 12% or $10 whichever is greater.
Senator Rukebai Inabo, Chairman of Senate Ways & Means committee assured the public that they will be conducting community level meetings and public education on the bill in the coming days.