Government of the Federated States of Micronesia

FSM continues its efforts for a tax reform

Palikir, POHNPEI (FSM Information Service): May 23, 2005 - The Federated States of Micronesia Tax Reform Task Force (TRTF) was created after the 3rd Economic Summit through Presidential Order No. 27 to be headed by the Vice President. Order 27 mandated the task force to structure a more efficient national tax system that will strengthen private sector development and also contribute to the long-term sustained economic development of the nation.

Among the agenda items for the upcoming meeting will be the value-added tax (VAT) currently being considered for implementation in the FSM. Value Added Tax is a general consumption tax assessed on the value added to goods and services.

Vice President Killion, as Chairman, headed the FSM TRTF on a fact-finding mission in mid-April to the South Pacific nations where the VAT format has been considered successful. Financial constraints limited the Mission's visit to only two of the many Pacific island nations with successful VAT systems, the Cook Islands and Samoa.

The Mission met with the governments of both nations, their ministries of tax and/or revenues along with each nation's Chamber of Commerce. According to Chairman Killion, the mission was a success as it "garnered a wealth of information and provided surprising insights that are quite challenging."

The VAT system was part of a tax reform package introduced in both nations' in response to a financial crisis. Chairman Killion said the VAT, along with the tax reform package, is credited with producing substantial increase in local revenues reducing the reliance on foreign assistance. Both nations are reportedly experiencing a healthy growing economy.

Chairman Killion further noted that the successful tax reform endeavor is credited to the cooperation between the governments and the private sector to address economic and fiscal policy issues, together.

Along with the Chairman, members of the Mission to the South Pacific included:

FSM Senator Sabino Asor, Larry Adams - Chairman of the Pohnpei Chamber of Commerce, Finley Perman - Director of Pohnpei State Treasury and Administration, and Lam Dang - Customs and Tax National Advisor for the FSM Department of Finance and Administration.