The Intentional Monetary Fund (IMF) has thrown its support behind the Palau government’s plan put in place, which will modernize and increase the efficiency and fairness of the tax system.
The IMF completed its 2018 Article IV mission last week and that it welcomed the nation’s plan to develop a “medium-term fiscal framework and to implement a tax reform as a first pillar of the fiscal adjustment strategy.”
The IMF agrees that its time for Palau to reform the existing Gross Revenue Tax (GRT) and import duties imposed by Palau and instead look into measures including the introduction of the Goods and Services Tax (GST) with a single rate and the Net Profit Tax.
The GST, which is also referred to as value added tax (VAT) has long been proposed in Palau.
The VAT is supposed to the country’s 4 per cent gross receipt tax and import tax of 3 per cent.
The Palau’s tax system has not been reformed since the time it was a Trust Territory and a tax reform will protect government revenues from tax evaders and create an equitable system of tax payment.
“The tax reform should aim to increase the efficiency and fairness of the tax system, and to mobilize domestic revenue,” according to IMF.
Earlier Palau was also removed from the European Union (EU) list of tax havens after making commitment to reform its tax system.
In March, Palau had been included on the blacklist for reportedly low tax transparency standards. (Bernadette H. Carreon)