By: L.N. Reklai

October 12, 2017 (Koror, Palau) Senate minority members issued a position letter yesterday to Senate President Hokkons Baules calling for reversal of the Social Security Tax and implementation of the PPEF Fee. [restrict

The letter calls for reevaluation of the increase in SS tax from 6% to 7% and use proceeds from PPEF  which they say was designed to raise government revenue so that it can pay its commitment.

“Minister Elbuchel Sadang has announced plans to initiate collection of PPEF starting January 1, 2018, so why not reverse all changes to the SS Tax now?  Why do we have to suffer even more when the implementing PPEF can generate the needed revenue?” poses the letter.

Senators Rukebai Inabo, Mason Whipps, Uduch Sengebau-Senior, Camsek Chin, and Regis Akitaya stated in their letter that the increase in SS tax will negatively affect standard of living for Palauans.

“This next fiscal FY2018, the SS tax will increase so starting this month the SS tax rate will increase from 6% to 7%.  Employees must pay more and the employer contribution has to match the increased SS tax.  As usual, the businesses will pass the cost to consumers by increasing price of what they sell.  We can anticipate increase to price of food, fuel, LP gas, other goods and services.  Inflation impact will be paid by the same employees who will have to shoulder the 7% SS Tax.  As a result, household income will be hit 2X and the standard of living in Palau will be negatively affected, weighting down family choices,” stated the Senate minority.

The letter included a spreadsheet reflecting rate of deductions for different salary brackets.  Those seeing the greatest deductions include salaried positions such the President of the Republic, Vice President, OEK members, assistant attorney generals, court counsels, electronic program specialists and Chief Liason officers, generally positions with salaries exceeding $24,000.

During the signing of the budget bill into law, President Remengesau expressed that the increase in SS tax will make the $50 retirement benefit a permanent part of Social Security Administration benefits, and not subject to annual budget appropriations.

Senator Reklai expressed that it that the removal of the ceiling on remuneration would be fair because those making over $24,000 will now have the tax assessed on their entire salary. Currently those making over $24,000 are taxed only up to $24,000.  When they retire their benefits will be based on their entire salary.

Delegate Isechal stated that this is the first increase in over 10 years on SS tax and that it was already in the books but the current amendment would only expedite the implementation by 3 years.

Minority senators expressed that this increase in SS tax in addition to increased utility rates (water and sewer), will raise the cost of living beyond the current wages and reducing the standard of living for the people.

“With the ever-increasing tariff on water/wastewater rates, coupling together with the increased SS Tax raises cost of living in Palau to a level unsupported by the prevailing wages.  The escalation in price for food, fuel, goods and services makes cost of living unaffordable, negating what minimum wage has attempted to do, which is to help the people improve their standard of living,” asserted the minority senators. [/restrict]