Koror State Governor’s Office and Koror State Public Land Authority believe that the proposed tax reform measure if passed as is, will drastically impact Koror State residents and businesses by increasing lease rentals and increasing costs of fees, licenses and permits.
In a letter to Senator Rukebai Inabo, Chairperson of Senate Ways & Means Committee, Governor Franco Gibbons and KSPLA Executive Director Rosemary Mersai both caution the proposed bill will force Koror State to “engage in mass termination, eviction and increases in rent for all lessees.”
The letter also states that certain section of the bill defines Koror State Government and Koror State Public Land Authority as “businesses” as such will be required to be PGST registered and to pay the 10% PGST tax.
This, concludes both entities, will require KSG to pay tax licenses and fees and KSPLA to pay taxes on leases and rentals. “The imposition of a tax burden on leases and rents will result in both KSG and KSPLA passing on the burden to its lessees in the form of increased rents and fees. This will necessarily mean termination of most if not all leases that have been issued by KSG and KSPLA. KSG and KSPLA do not want to be forced to increase rent or terminate leases for anyone, least of all for some of the most vulnerable members of our society.”
The letter went on to state that the language in these sections create vagueness and do not address certain issues such as valuation of a lease which can result in different results if using different methods.
“What is clear from the section is that it is a double tax on KSG and KSPLA operations requiring payment of 10% under the PGST provisions and an addition 4% under this section for any and all leases. A 14% tax on leases render one of the largest revenue sources for the State completely devastated.”
In addition to taxes, annual evaluation for market value, new tax on transfer of leases will increase cost burden to the State, argued KSG and KSPLA.
As result, they say, consequences will be, “1) KSG and KSPLA will have to make further cuts that will impact our ability to provide quality service to our lessees and prospective lessees; 2) our rents, fees and other imposed costs that are passed along to our lessees will increase by at least the amount of any tax burden and 3) KSG and KSPLA will be forced to terminate nearly all of its leases so they can be renegotiated at rates that are linked to the fair market value of the properties, which will assuredly increase rents by a factor of ten or more.”
Both Koror State Government and KSPLA proposed that to avoid all the above-mentioned consequences, the proposed tax reform bill must eliminate “government entities” from Section 1203 and remove them from being required to pay the 10% PGST. (By: L.N. Reklai)

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