by Alonzo Kahalic
alkahalic6801@gmail.com
Palau Goods and Services Tax: Who Really Benefits?
Dear Editor,
Today, I want to talk about the affects every one of us in Palau feels with the Palau the Goods and Services Tax (PGST) also known as the Palau Government Stress Tas. While this tax system may have been introduced with the promise of boosting our economy and enhancing government revenue, it’s time to ask a crucial question: who is really benefiting from PGST?
PGST, as we know it, is a value-added tax that is levied on most goods and services in Palau. The government implemented this tax to generate revenue and promote economic growth. However, over the last year it has become increasingly evident that PGST may not be the savior we thought it would be.
The first point of contention is how PGST affects everyday consumers, the very people it was supposed to help. When we go to the store, we see the prices of goods and services continuously rising. The cost of living keeps climbing, yet many of us struggle to make ends meet with our stagnant incomes. This discrepancy between rising prices and stagnant wages is concerning, to say the least.
Let’s take a closer look at how PGST affects the average Palauan. Imagine you earn a modest income, which is the reality for many of our fellow citizens. Based on the census of 2020, 61% of Palauan’s make below the $10,000/year income and 17% make between the $10,000-$14,999 a total of 78% of our people are living off 15,000 a year. Yet when we head to the grocery store to buy the essentials, only to be confronted with higher prices due to PGST (food is now taxed for the first time, with PGST). It’s as if your hard-earned money is slowly slipping away while businesses pass on the tax burden to you.
The burden of this tax often falls disproportionately on consumers rather than businesses. This is because businesses, in their quest for profit, tend to increase the prices of their products and services to offset the PGST they have to pay. In essence, consumers end up bearing the brunt of this tax indirectly.
Moreover, the complexity of PGST can make it difficult for consumers to understand where their money is going. It’s easy for businesses to incorporate the tax into their pricing structures, leaving consumers in the dark about how much PGST they are paying. This lack of transparency further exacerbates the problem.
Now, let’s shift our focus to businesses. PGST was meant to provide a boost to our local economy by increasing government revenue, which could then be reinvested into public services and infrastructure. However, some businesses seem to be reaping the benefits more than others.
One of the key issues here is the lack of competition in Palau. With a limited number of businesses dominating various sectors, there’s little incentive for these companies to lower their prices despite the introduction of PGST. In fact, some businesses have taken advantage of the situation to maximize their profits.
Another concern is the impact on small businesses. While larger corporations may have the resources to navigate the complexities of PGST and absorb some of the costs, smaller enterprises often struggle. They may find it challenging to remain competitive while complying with the tax regulations, potentially leading to business closures and job losses.
So, what can be done to address these issues and ensure that PGST benefits both businesses and everyday consumers in Palau? First and foremost, there needs to be greater transparency in how PGST is applied and passed on to consumers. Businesses should clearly indicate the PGST portion on receipts, allowing consumers to understand the tax they are paying. We don’t want just a 10% increase on everything. We want to know, isn’t it supposed to be only the added value part is taxed?
Additionally, the government should consider implementing measures to ease the burden of PGST on low-income individuals and families (the 78% of Palauan) by making an exemption for essential items like food. Where are our leaders in the Executive and Legislative branches to make this law. We have too many actors on tv during hearing pretend to say something, why don’t we make the law now, its been one year of this burden.
In conclusion, the Palau Goods and Services Tax was introduced with the promise of boosting our economy and increasing government revenue. However, it’s become evident that the burden of this tax often falls disproportionately on everyday consumers, while some businesses appear to be benefiting more. It’s high time we address these issues, promote transparency, and work toward a system that truly benefits both businesses and the people of Palau.
Your Humble Servant, Al Kahalic
Great topic.