Toribiong proposes $60M budget for FY2012

Island Times , July 8, 2011 issue
Annual budget proposal is 10 percent more compared to last year’s level


President Toribiong yesterday transmitted to the Olbiil Era Kelulau the proposed FY 2012 Annual National Budget Authorization and Appropriation Act, totaling to $60,798,000.

The president said that the bill proposes an approximate 10 percent increase in spending over the previous level. He justified the increase with the increase in number of tourists coming to Palau, thus increasing revenues from green fee collection, and the increase in tax revenue.

“The increase in tourism has resulted in increases in the local revenues and in the Environmental Protection Departure Fee, the so-called green fee, collected by the Ministry of Finance, which in turn permits us to increase the appropriations contained in the budget bill to levels commensurate with the actual needs of our people. Our tax revenues are expected to exceed our projection. As of June 30, our tax revenue is 82 percent and our green fee collection is 93 percent of our projections,” Toribiong said.

The president also included in the bill the increase of minimum wage paid to all employees, except to domestic helpers and farmers, from $2.50 per hour to $3.50 per hour by the first of January 2015.

Having the wage increase by 2015 will reportedly allow employers to adjust to the increased cost of labor.

Toribiong proposed that the wage increase apply to local and foreign workers because if the proposal is limited to locals, he anticipates that employers will reject hiring Palauans in favor of foreign workers because the minimum wage is not applicable to foreign workers.

Toribiong also proposed to temporarily increase wages of vast majority of government workers. He warned that if the OEK will not enact an increase in minimum wage, he will seriously consider proposal to give cost of living allowance to government workers.

The president said that “the rising tide that this budget bill is intended to create has to lift everyone’s boat and not just those of the few who happen to be working for the national government.”

Proposed COLA is $520 for those employees making less than $25,000 per year. This shall be paid in $20 biweekly installments. Toribiong further proposed that this COLA be exempt from wage and salary and social security taxes, from contributions to the Palau Pension Plan and from contributions to the National Medical Savings Fund.

“As long as the OEK agrees to fund the state governments with the money from the green fee, as I also propose in this budget bill, then there will be more than enough local revenues to fund this COLA,” Toribiong said.

Following the proposal to increase minimum wage is the proposal to decrease wage and salary tax from six to three percent for the lowest paid employees (those making less than $8,000 a year). For employees making more than $8,000 per year, the tax rates on the first $12,000 of wages and salary will remain the same as they are now. However, the tax rate on the portion of wages and salaries from $12,000 to $25,000 shall increase from 12 to 14 percent. For those with salaries above $25,000, they shall be assessed a tax of 18 percent.

Toribong also proposed appropriation of $75,000 for the purpose of providing $100 stipend per month to 51 families identified in the 2009 household income survey as having no income whatsoever.

With the additional expenses identified in the bill, Toribiong proposed measures as source of funding.

Toribiong proposed to increase green fee from $15 to $30. The president said that the green fee has proved to be a very successful method of raising revenues. “It is also a source of revenue that does not impact directly on our people,” he said.

The president said that at current levels, the green fee is estimated to bring in approximately $1.4 million this year. If the green fee is increased to $30, then it is expected to generate as much as $2.8 million and possibly more if tourism continues to grow.

Toribiong said that state governments currently require approximately $4 million a year. He sees the increased green fee collection as viable source of funding state governments.

Toribiong also proposed an increase in hotel room tax from 10 to 15 percent, which level is reportedly commensurate with room tax rates charged in other jurisdiction.

He also proposed $1 tax per dive for visiting scuba divers to defray the costs of the operation and maintenance of decompression chamber at the hospital to serve those who choose to dive in Palau.

“All revenue enhancement measure contained in the budget bill need to be enacted in order for the budget to work,” Toribiong said. The president has repeatedly proposed the same revenue measures in the past. However, the same measures repeatedly fail to pass the OEK as well.

Toribiong warned that if any of the revenue enhancement measures are not passed this time, he will either reduce or veto several appropriations to bring the overall spending in line with the expected revenues.

Toribiong also included two other provisions as riders. These include amendment to the laws creating the National Development Bank of Palau and the Palau Public Utilities Corporation.

With NDBP, the president said that the amendment is to make the bank more transparent and accountable. As to PPUC, the amendment is to relieve the government of interest on its outstanding accounts and establish a process to resolve all the government’s previous outstanding accounts which have accumulated over several years.

The president informed the OEK that he is ready to appear before the legislative bodies to testify regarding the bill. He asked the OEK not to make any changes to the bill until he or his staff appear before them and explain the basis and need for each proposal.


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