THE House of Representatives on Friday unanimously passed House Bill 23-103, which would exempt export services and the sale or exchange of securities and similar assets from the business gross revenue tax or BGRT.
Authored by Rep. Manny Gregory T. Castro, the bill also proposes to allow rebates for exempted activities. It seeks to amend the local tax code to remove “impediments to the attraction and retention” of businesses participating in the global digital economy and financial markets. This could “foster a rapid growth of these industries in the Commonwealth, which could result in a significant increase in tax revenues.”
All 17 members present voted to pass H.B. 23-103, which now goes to the Senate.
House Floor Leader Edwin Propst, Reps. Ralph N, Yumul and Joe Flores were excused.
Prior to the passage of the bill, three U.S.-based digital business investors testified in support of the measure.
Among them were Vin Armani, owner of Badger LLC, a Saipan-based software company; and Joshua Cook, owner of Pacific Pact, also a Saipan-based consulting company engaged in cyber technology and in another business in the U.S.
Cook told lawmakers that in the CNMI, a company operating on a 15% profit margin before tax has to pay a 5% BGRT. This means the company is being taxed 30% of its profit, he added.
“So why would a company…pay 30% [tax] in the CNMI, when they could be paying 21% [tax] in the U.S.?” he asked.
He said many businesses in the U.S. were very excited to hear about the tax benefits in the CNMI, but the BGRT “is a game changer — it prevents them from [coming here] [because] the economics of it does not make sense to them.”
Cook urged lawmakers to “incentivize businesses who otherwise could not afford to come to CNMI to come here and pay taxes. They will still pay taxes — it just won’t be the BGRT.”
He said H.B. 23-103 would “help create that incentive for them to come” to the CNMI.
Prior to voting on the bill, Castro told colleagues that “in light of the current economic situation, I ask for your support for the passage of H.B. 23-103.”
He said one of the biggest challenges for any small or big business coming to the CNMI “is our policies.”
The CNMI government, he added, must try to bring in more businesses so they can “help our community grow and improve government services.”
“Given the limited resources we have, in terms of natural resources, there’s not a lot of industries that can invest here,” he said. “The benefit of this bill is that it entices digital industries with one of the biggest gross profit margins. It allows our community to diversify our economy, which would in turn improve all public and community activities on our island,” Castro added.
“If we want to bring in more people to invest into the Commonwealth, we have to take a look at our policies and improve them so that they’re more beneficial to the stakeholders,” he said.
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Post from Marianas Variety