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October 14, 2004
U.S. Virgin Islands Balks at Tax Changes
From the AP:
10.12.2004
Investors and government officials criticized a U.S. congressional bill that drastically reformed a corporate tax break program in the U.S. Virgin Islands, warning it could derail the territory's 2005 budget.
The bill, which the U.S. Congress passed Monday, imposed stricter rules for corporations receiving tax breaks under the 17-year-old Economic Development Commission program.
The program has lured more than 100 companies to the U.S. Caribbean territory, employing thousands of residents and contributing up to 25 percent of government revenue through spending and taxes, officials have said.
Critics warned the new rules could chase away businesses expected to contribute more than US$115 million in taxes next year - about 19 percent of the US$605 million 2005 budget.
Gov. Charles Turnbull warned the new regulations could "have serious financial consequences for the territory."
He said government officials hoped to meet with officials from the Treasury Department and the Internal Revenue Service to discuss how the bill will be implemented, vowing to "use all our resources and leave no stone unturned in our efforts to protect this important and essential program."
Officials based the 2005 budget on an estimated 30 percent increase in government revenue. But the new rules could lead to a drop in revenue if businesses pull out of the territory, said U.S. Virgin Islands Senator Shawn-Michael Malone.
"I don't want to scare people, but I want people to see the potential loss," Malone said.
Under the new rules, businesses must conduct all their transactions inside the U.S. Virgin Islands to be eligible for the tax breaks. Before, some businesses with transactions outside the territory qualified.
The new regulations also require a company's primary assets to be located in the territory. Business owners also must reside in the U.S. Virgin Islands for at least 182 days a year.
The Economic Development Commission program came under criticism earlier this year after a man was convicted for falsely claiming he lived in the U.S. Virgin Islands to get tax breaks.
"This is a terrible blow to our economy. There's no question there will be serious fallout in the program," said Rick Moman, chairman of Corporate Services Group, LLP, which has real estate and financial consulting firms in the U.S. Virgin Islands and has benefited from the program since 1996.
Moman said he was still studying the new regulations to determine how they would affect his business.
Other companies that benefit from the tax breaks include hotels, museums, rum distilleries and construction material manufacturers.
Posted by afinta at October 14, 2004 12:11 PM
