It Appears A 3.0% Tax On Land Leases Is A Burden The Marshallese Landowners Are Unwilling To Bear  Bottom

  • This 14 February 2014 Journal, on page 15 has info on upcoming tax reform legislation. The table notes that, "All Immovable Property Tax revenue is now going to local governments." Immovable Property Tax is the tax on land lease payments. Thus, means that in the future, the payments shall go to local governments under new tax law, so Ebeye Local Government, as example, will directly receive all Kwajalein land lease payments. Who will control those funds?

    The table also tells us the current and future amount collected from this tax will remain at about $486,000 (rounded up to nearest thousand). The current tax rate on land lease payments (immovable property) is 3.0% and thus appears no change to this rate is planned.

    As noted, the immovable property tax is the tax landowners are supposed to pay on all land leases. So, this includes, of course, Kwajalein, for which the annual lease payment (in FY 2014) is $18M per year. Of course, there are a LOT of other land leases paid for by the government – land occupied by all the schools and clinics on all the islands, land for the airport on Majuro, land for all the government offices on Majuro, land for the hospitals on Majuro and Ebeye, land for the College of the Marshall Islands, land for the government owned Marshall Islands Resort and for MEC, etc. etc.. The government has never stated the total cost to Marshallese taxpayers for all these leases but can we agree would be at least $2 - $3 million a year?

    Now, here is the interesting part. At a 3.0% tax rate, the tax paid on ONLY the Kwajalein land lease payments by the landowners should be $540,000 per year. This is simple math - $18,000,000 * .03 (3.0%) equals $540,000.

    Moreover, in FY15 and beyond, the land lease payments for Kwajalein will increase annually. Per the Compact of Free Association. Section 212, ("Kwajalein Impact And Use"),

    QuoteFor FY 2015 through FY 2023 (and thereafter in accordance with the Agreement between the Government of the United States and the Government of the Republic of the Marshall Islands Regarding Military Use and Operating Rights) the annual payment will be the FY 2014 amount, with an inflation adjustment as provided under section 218.

    Nevertheless, per your government, the total collected now and the following year for ALL NATIONWIDE immovable property (land lease) taxes shall remain at $486,000 (rounded up). So, clearly the landowners are not paying the full 3% tax. If the total land lease payments – Kwajalein plus all others combined - are $21M, a 3% tax would generate $630,000 per year. The amount being collected, now and in 2015, is only $486,000 (rounded up) per year. Do Marshallese view a 3.0% tax on land lease payments as excessive?

    Meanwhile, the same issue of the MI Journal reports that Principal Konou of MIHS is now requiring each student of the high school to pay $1 per month ($9 per student per year) because the school has no money for things like toilet paper and light bulbs.

    Edited by pettittm on Feb 19, 2014 - 10:33 AM.

    “I hope the signing of the LUA (Land Use Agreement) allows the Government of the Marshall Islands more time to focus on the biggest issues it faces – how to raise the level of education and health of the Marshallese people and how to create an economy that will be stable after direct US funding ends in 2023.”
    US Ambassador to the Marshall Islands Martha Campbell, as quoted by MI Journal, 13 May 2011, pg 4
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