To the editor:
We, unlike U.S. mainland cities and states, keep the U.S. income tax. Therefore, gross receipt taxes, excise tax, duty and commercial real estate property tax, license fees and road tax on commercial vehicles—that are all deductible expenses—distort the selling price but do not increase the total annual collected tax income of the Virgin Islands.
This lack of understanding of our unique tax status generates high cost of doing business in unnecessary paper work. Normally, on the US Mainland these taxes serve to shift funds from the Federal Government to the local one. In our case, we reduce the amount of income taxes paid by the amount collected in these other taxes. This results in higher prices paid by the consumer with no real benefit to the Government.
We would be better dropping them entirely. Prices would go down on goods. Total collections would not vary. The collection cost of the Government would reduce.
In their place, we should consider levying a 2 percent sales tax for a 5 year period. Sales taxes are not deductible. For 5 years this extra tax income would be used 50 percent for back wages and 50 percent for reducing our bond indebtedness. At the end of 5 years this could be extended only if we still owed back-wages and bond debt. An extension should require a referendum vote. This 2 percent should be levied on commercial property rents. We should consider raising the sales tax on property rented for over $60 per square foot to 4 percent and on property rented for over $80 per square foot to 6 percent.
To enhance our status as a duty free port of call we should consider exempting the WICO docks, Main Street and Sub-base, treating these areas as special enterprise zones. These are not neutral equations. Eliminating this tax should enhance sales so that income tax collections would increase by more than the amount of taxes now collected.
Michael Paiewonsky
