On Tuesday, senators questioned Gov. Albert Bryan Jr.’s financial team about whether a sales tax was better for the territory than a gross receipt tax. Everyone agreed that more study was needed.
Sen. Angel Bolques was first to point out that the 32nd Legislature passed a bill mandating the creation of a Tax Study Commission over two years ago.
Bureau of Internal Revenue Director Joel Lee said he was a nonvoting commission member, and no meetings had been held yet. He said it was difficult to find people to serve on the commission. He said the commission needed members who were tax experts yet had no position that would look like a conflict of interest.
Finance Department Commissioner Kevin McCurdy said some names had been recommended for the Tax Study Commission, but “We just have not mobilized yet.”
Office of Management and Budget Director Julio Rhymer said some financial team officials were meeting and discussing the potential for structural changes in the tax system “outside the commission.”
Gov. Charles Turnbull appointed a tax study commission in 2001. The commission was tasked with examining the territory’s tax laws and assessing how changes in tax policy could affect business and development.
In 2020, when former Sen. Donna Frett Gregory was crafting the legislation for a bill later signed into law by Bryan, she called it a reenactment.
Senate President Milton Potter, who chaired the Committee of the Whole session, said senators would have to determine how long they wanted to wait for the Tax Study Commission’s recommendations before taking matters into their own hands. Sen. Kurt Vialet said the senators would have to be “leery” of any recommendations made by the tax study commission. “We might not want what they recommend.”
Under question from Sen. Marise James, Lee said that bondholders would have to approve any lowering or elimination of the gross receipt tax. He added that bondholders would probably be reluctant to approve any reduction.
“So our hands are forever tied to the length of the bond agreement,” she said.
“Yes,” he replied.
Earlier in his testimony, Lee said, “Just to set the record straight from the beginning, I want to point out that these two taxes can be administered simultaneously. There is no rule that would indicate that we need to choose between the two taxes. However, it is important to note that the Virgin Islands has always been marketed as a duty-free destination, so we should keep that in mind as we consider the impact that this may have on our tourism market, especially as we compete with other Caribbean destinations.”
Sen. Hubert Frederick said the government was losing a lot of income because mail orders coming into the territory through services like Amazon were not being taxed.
“We don’t even know what we are missing,” Lee said.
“I know for a fact that it is significant,” McCurdy said.
James asked which tax has the most burden on the poor. Lee said that in many jurisdictions, when a sales tax is applied, certain items like clothing and food are exempt.
Senators pointed out that “no one likes to pay taxes, but everyone wants service.”
