A proposed amendment to the Fiscal Year (FY) 2024 Supplemental Budget could significantly impact Palau’s state governments. The amendment would distribute 50% of revenue collected from the Gross Revenue Tax, Business Profits Tax, and Hotel and Vessel Tax to the states where the businesses are located.
This measure would potentially split an estimated $9 million in tax revenue with the relevant states. Koror, with nearly 90% of all registered businesses, stands to gain the most from this proposal.
According to the Palau Ministry of Finance’s FY 2023 fourth-quarter revenue collections report, Business Profits Tax amounted to $3 million, Gross Revenue Tax to $4.2 million, and Hotel Occupancy Tax to $1.8 million.
The Ministry of Finance’s FY 2024 revenue projections shows an expected $1.8 million Business Profits Tax. However, based on strong second-quarter performance exceeding projections by 173%, the actual collection could reach $6 million. Hotel Occupancy Tax projections for FY 2024 sit at $2.2 million, with collections on track to meet expectations as 48% has already been collected by mid-year.
Combined, these taxes could generate approximately $9 million in FY 2024. If the amendment passes as proposed, this amount would be shared equally among the states where the taxed businesses operate.