April 4, 2011

By Bill Jaynes
The Kaselehlie Press

March 31, 2011 Palikir, Pohnpei, FSM-After several years of concentrated development efforts the FSM tax reform process is at long last on its way. The 16th FSM Congress today passed a historic bill (CB 16-154 CD 1) that will, if the President signs it into law, establish a new tax authority for the entire nation, the Unified Revenue Authority (URA).

According to the Congress Ways and Means committee report (CR 16-139) the bill that establishes the URA is the first of five tax reform bills for the FSM and is the "foundation of the greater tax reform initiative."

URA will not actually be set up until a year after the President signs the bill into law if he chooses to do so by which time at least some of the FSM tax reform bills will have passed Congress scrutiny. On the fl oor of the Congress chamber during debate Senators said that it will be at least two and half years before the tax reform can be fully functional and the establishment of the URA is just the first of many steps including those legislative steps that need to be taken within each of the States.

The URA will be the sole tax entity in the nation and will replace out right all of the taxing authorities that currently exist at the National and State levels. They will be responsible as well for the appropriate distribution of those collected revenues to the National and State governments on a percentage basis defined in the bill.

"The URA is meant to be an independent tax collection unit," the Committee report said. In support of the URA's "independent" nature the committee report said that the URA will be governed by six Directors, one from each State, one for the National Government and one non-voting member representing the private sector. The Committee report says that the board will hire a Chief Executive Officer who will be responsible for all operational aspects of the URA. "Because the CEO is hired by and remains at the pleasure of the Board only, the CEO is insulated from political influence," the committee report claimed.

The report said "the other mechanism bolstering the URA's independence is its funding. The URA's operations will be funded directly by a portion of each government's taxes collected. This will provide steady and adequate funding for the URA without depending upon yearly appropriations," the Ways and Means committee report said.

The bill essentially outlines the qualifications and standards for selection of Board members and lays down the fundamentals of the operation of the URA. It is sometimes difficult to remember when reading through the 49 page bill that the taxes URA will be responsible for collecting and distributing are not the same kind of taxes that are currently being collected throughout the FSM. The Congress Bills for each step of the tax reform have already been drafted and are currently being reviewed in committees.

"Your committee insists that in order for the tax reform to be successful and for the URA to collect each government's taxes, the cost of URA operations must be equitably shared among the five governments," the report said.

Employees of the URA would not be subject to the Public Service system. "This policy represents additional effort to make the URA an independent and powerful tax collector. It is imperative to efficient tax collection that the CEO and Board have control over the personnel responsible for URA operations," the report said.

In terms of current existing revenue authority employees the bill says, "The Authority will offer contracts of employment to all existing revenue authority employees in good standing provided that the Authority is not required to hire the employees at the same salaries or to fill the same positions…" The Committee Report recommending the passage of the bill was signed by the members and dated March 29. It was adopted by Congress on that same day after considerable discussion by the ten members of Congress of the total membership of 14 who were present on that day.

A bill requires an affirmative vote from at least ten members and Senator Christian clearly stated that he would vote "no" to the passage of the bill on first reading because of substantial questions he had about the bill that had never been answered. Knowing that the bill was doomed to failure because of the "veto power" of that lone Senator, Congress deferred the first reading of the bill until the next day.

But on the next day there still were only ten Senators on the floor of Congress including Senator Christian but his questions had apparently been answered overnight. Themvote was unanimous to pass the bill on its first reading. Because of the four missing Senators it was the only way it could have passed the first reading.

Congress voted to extend the already extended 6th special session by one day and on Pohnpei and FSM Cultural Day the remaining Senators passed the "URA Bill" on its second reading.

"I felt it was important for the 16th Congress to make the first important step for (FSM) tax reform before it adjourns," Figir said during a telephone conversation later that afternoon.