Tax credits to be abolished
Hoteliers endorsed under the Tax Credit Scheme will have to pay tax come December 1st, 2017.
The Tax Credit Scheme was enforced in 2003 under the Income Tax Amendment Act which allowed hoteliers not to pay taxes but invest in other hotel developments.
This Act is renewed every five years.
The Act states that a person, who invests at least $100,000 in an approved tourism development, is allowed a credit against income tax payable for the person’s income at the rate of 100 percent of the investment.
However, under the conditions of the Act, the approved tourism developer provides first class hotel accommodation in Samoa, approved by Cabinet.
The Bill to terminate the Tax Credit Scheme was approved in second reading during the recent one-day Parliament sitting and referred to the Economic Sector Committee for a report to hand to Parliament within 90 days.
Minister of Revenue Tialavea Tionisio Hunt stated the primary objective of the Bill was to extend the expiration date for income Tax Credit Scheme from 30th June, 2017 to 1st December, 2017.
“This law should be abolished. I don’t know who created this law but it should be abolished,” said Tialavea during the Parliament sitting.
“Initially the tax credit should have been terminated by June, 2017, however due to requests from the hotels approved by the Investment Committee for extension, hence the Bill’s extension to 1st December, 2017.
“This was an issue I discussed with Minister of Finance, who agreed and noted the government has invested in a hotel, yet the hotels who are not paying taxes are not investing in hotels.
“This is why this Bill is important and is discontinued effective 1st December, 2017.”
The move was supported by the Member of Parliament for Vaimauga East, Sulamanaia Tauiliili Tuivasa.
He was under the impression that tax credits had already ceased to exist.
“For the longest time, the hoteliers have benefited from this scheme,” said Sulamanaia.
“I was happy this scheme would be eliminated by 30th June, yet the extension is for another six months, 1st December, I think this law should be abolished immediately.
“I do not support the extension,” said Sulamanaia.
Tialavea explained to Members of Parliament the extension was granted upon the request from the Chamber of Commerce and the hoteliers.
“The request came from the Chamber of Commerce asking for the extension to 1st December, 2017.
“The difficulty, according to the Chamber is that hoteliers made the request for the extension due to the prompt move to discontinue this scheme immediately at the time, back in June.
“This will be the last of this type of scheme,” said Tialavea.
Prime Minister Tuilaepa Sailele Malielegaoi says this has been going on for far too long.
“Even to those hoteliers who received assistance through this scheme and after many years, we are still waiting for the new hotels, but so far nothing.”
Tuilaepa says it is not financially feasible for new non-registered investors to seek another extension under this scheme because nothing can be done within six months.
“There are businesses that have sought government assistance and of course once that has happened, then the waiting game starts.
“There are also businesses who have visited the Minister to reconsider his decision and have come to me and I tell them that is what you get for waiting and waiting.
“If the business had worked on their hotels, by now there would be a lot of hotels, then we would not hire the cruise ship to cater to the off island visitors when we had the Small Islands Developing States forum held in Samoa.
“At the moment there are a lot of people who are making bookings with local hotels and this is one of the reasons why the Government invested in the new airline to bring tourists to Samoa,” said Tuilaepa.
As reported last month, Tuilaepa told the Samoa Observer the scheme has deprived the government from collecting much-needed taxes for the development of the nation.
Such taxes, he said, was money that should be paid to the government. Millions of tala is involved.
“It’s a tax credit for certain companies on the excuse these companies will invest.
“But those infrastructures are often delayed which at the same time deprives the government, in terms of revenue for our development,” Tuilaepa added.