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HomeNewsArchivesHOUSE PASSAGE OF TAX RELIEF BILL 'GOOD FOR V.I.'

HOUSE PASSAGE OF TAX RELIEF BILL 'GOOD FOR V.I.'

Nov. 21, 2003 – Benefits the territory would receive under the Tax Relief Extension Act of 2003 passed Thursday night by the U.S. House of Representatives signal "good news for the Virgin Islands economy," Gov. Charles W. Turnbull said on Friday.
They are an increase in the duty-free allowance for visitors to the territory returning to the U.S. mainland, an extension of the current level of federal rum taxes received by the local government, and new benefits for the V.I. watch and jewelry industry.
Delegate Donna M. Christensen sent word to the territory shortly after the vote took place on the House floor on Thursday night. (See "U.S. House OKs duty, rum-tax, watch advantages".) In a release issued on Friday, Turnbull said the U.S. Senate "is expected to take up a similar measure before Congress adjourns for the year in the next several days." The two versions would then have to be reconciled and sent to the White House.
The governor said that the increase in the duty exemption — which would be the first such increase since 1990 — "is intended to spur additional spending by tourists, who are the lifeblood of our economy." He said that during consideration of the measure in committee, "the Virgin Islands was able to defeat proposals to provide a higher exemption for tourist purchases in foreign destinations which would have eroded the territory's current advantage."
The House bill increases the duty exemption for non-U.S. Caribbean entities to $800 from the current $600, bringing the region into line with other jurisdictions, but at the same time it increases the V.I. exemption to $1,600 from the current $1,200, maintaining the traditional 2:1 advantage for the U.S. territory.
Under the current rum-tax formula, the release noted, the territory receives $13.25 for each proof gallon of rum shipped to the U.S. mainland. This "cover-over" formula is to expire at the end of this year and revert to the former rate of $10.50 per proof gallon. The House bill would extend the higher rate of return for another year beginning Jan. 1
"Extension of the higher rum tax rate, which was one of the Turnbull administration's top-priority Washington initiatives, is expected to generate an additional estimated $18 million to $20 million for the V.I. government in the coming year," the release stated.
The House bill also "expands and strengthens the Production Incentive Certificate program," which combines duty exemptions and wage credits to promote watch and jewelry production and employment in the territory, the release said. An expansion of the PIC program in 1999 to include the jewelry industry has "resulted in a number of jewelry manufacturers relocating to St. Croix in recent years," it said. The bill would extend the PIC program to 2015.
The PIC amendments also would "protect the watch industry — the territory's largest light industry — from the effects of future international trade agreements," the Government House release said.
"Currently, U.S. duties on foreign watches provide an important competitive advantage to Virgin Islands watches, which enter the United States duty free," it said. "An important provision in the new bill will assure that any future reductions in U.S. watch duties, as may be required by future international trade agreements, will be matched — and thus offset — by a corresponding increase in PIC benefits for V.I. watch producers."

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