According to a Virgin Islands Daily News article, the tax hike was suggested by Gov. John deJongh Jr. during his State of the Territory Address delivered recently.
“You would be lowering everybody’s standard of living in the territory,” Noel Loftus, a St. Croix businessman, said of his thoughts on the proposal. “You have businesses that can’t afford it in the first place. We’ve had amnesty after amnesty for businesses that can’t pay the gross receipts taxes.”
Business leaders said they want to see the government truly streamline and become more efficient — and enforce and collect the amounts owed under existing tax law — before it turns to raising the gross receipts tax, which is levied on every firm and individual doing business in the Virgin Islands, with few exceptions.
Currently, business owners owe the government 4 percent of gross receipts — any money coming into the business — in taxes.
Although consumers do not pay the tax directly, the cost is typically passed onto them by pricing goods and services higher to pay the tax.
The tax also has a multiplying effect, rippling outward and increasing the final cost to the consumer as it is added on to the price of a good each time it moves through the supply chain, through each middleman, before it reaches the final consumer.
DeJongh wants to raise the tax to 5 percent, an increase of 25 percent, to raise more money for the government.
“The St. Thomas-St. John Chamber of Commerce strongly opposes the proposed increase in gross receipt taxation. This tax embeds itself in a good’s price as the product is passed along a production chain. In essence, gross receipt taxes are stealth taxes that hide their true costs from the consumer,” Richard Berry, president of the Chamber, said in a prepared statement.
The proposed increase “comes at a time when businesses can least afford additional taxation,” Berry said in the release, noting that local businesses are continuing to suffer because of the recession.
Government must implement measures to collect gross receipts taxes “from all segments of the community which we believe will have a material impact on closing the budget shortfall, instead of placing additional burden on those businesses that adhere to the current system,” Berry said in the release, which also praised some of the ideas the governor spoke of in the speech, including his “plan to put the territory on a path to economic growth.”
The St. Croix Chamber of Commerce is also opposed to the proposal to increase the gross receipts tax, which members contend could send struggling businesses over the edge and raise the cost of living significantly for all Virgin Islanders.
Scot McChain, president of the St. Croix Chamber of Commerce, said that the organization polled its members on the proposal.
“The overwhelming response was that it’s not going to be good for business — that it would be bad for our constituents and for the community as a whole,” McChain said. “Businesses are struggling at this time.”
He noted that in order to stay competitive, some businesses may have to simply absorb the additional cost rather than pass it on to the consumer, while other businesses may have contracts in place that would prevent them, initially, from passing the additional burden on.
(Content for this article was take from a Virgin Islands Daily News article)