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Thursday, March 28, 2024
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SALES TAX MEETS WITH OPPOSITION

Sen. Gregory A. Bennerson said his proposal to introduce an 8 percent tax on all net sales will generate much-needed revenue within the territory.
His proposal was met with opposition from local business people who expressed concerns about the potential ill-effects the tax would have on tourism and the possibility that it would lower the islands' standard of living.
Bennerson released a rough draft of the legislation Tuesday.
"Our businesses are struggling to stay open, (and) a sales tax will lessen the load," Bennerson said. "With our average excise tax rate at 4 percent and the gross receipts tax at 4 percent, businesses have to mark up their products just to break even."
He added, "This sales tax proposal is an up-front collection of revenues, as opposed to the present gross receipts tax that is rear-end collection and prone to under-collection of revenues."
Although it is unclear how much revenue the 8 percent tax would generate, Bennerson said the additional funds could provide for cancer and heart disease treatment centers, develop recreational programs within local housing communities, fund capital improvement projects on St. Croix, develop an Agricultural Marketing Commission and pay some retroactive wages owed to government employees.
The proposed sales tax will grant an exemption to individuals, firms, partnerships, corporations and other associations conducting business in the Virgin Islands. Businesses that are required to pay gross receipts taxes will be required to report their net sales, and collect and pay an 8 percent tax from the customers on such sales, according to Bennerson.
Noel Loftus, president of the St. Croix Chamber of Commerce, said the sales tax would create unemployment and pull even more economic activity from the territory.
"Very simply, the net result will be that more and more people will make their larger purchases off-island to avoid the sales tax, more and more people will lose their jobs and we will close more businesses," he said.
Loftus added, "This bill is very poorly thought out and I am firmly convinced that the business community will oppose this."
Loftus doesn't favor any new tax proposals designed to cure the territory's economic woes. He said the problem lies with the management of revenues being collected.
John de Jongh, president of the St. Thomas/St. John Chamber of Commerce, was off-island and could not be reached for comment Tuesday.
Tom Brunt, a member of the board of the St. Thomas/St. John Chamber of Commerce and former president, said the big question surrounding the proposal is whether it can generate the same amount of revenues as gross receipt taxes. Previous studies indicate that the sales tax would have to be greater than 8 percent to do this, he said.
But before any changes are implemented in the territory's tax structure, Brunt said the government must reduce its spending habits and develop a comprehensive plan.
"The biggest problem with the proposal is trying to fix our tax structure with piecemeal efforts," he said. "This is going to produce results that may be more detrimental than our current system."

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