A Focused Collaborative Approach to Economic Development

Sunday, June 1, 2008
American Samoa Economic Advisory Council

Excerpt from the report:

Economic Advisory Council
Pago Pago, American Samoa
June 2008
The concept of policy reform can be both simple and difficult. In its simple format, policy reform may entail no more than a simplification of procedures designed to make doing business with the American Samoa Government easier. For the purposes of this paper we are assuming the role of non-US overseas investors that intend to establish a manufacturing operation in American Samoa to service the US market. To ensure a balanced view of each issue, substantial discussions have been held with the various government departments and where practicable their comments have been incorporated in recommendations that have been made.

Areas of concern are:
Business Licenses
As it currently stands it could take up to 6 months for new investors to navigate the cumbersome business license application process and that assumes that the investors have employed a competent person to guide them through this complex process.
Corporate Tax Policy
Serious investors will consider the tax environment that they will operate under and they will quickly identify that American Samoa tax rates are some of the highest in the world and by far the highest tax rates in the South Pacific. In addition they will be expected to pay; withholding tax on any dividend payments made to the parent company after payment of the high income tax; withholding tax on any interest payments on borrowings from non-US based banks and on any management fees paid to the parent, and; withholding tax on payments to any non-US based contractor or service provider. They will also be faced with high and inconsistent levels of Import Excise Tax on all fixed assets and raw materials sourced from off-shore. This can add up to an effective tax rate in excess of 65%. The investors may be told that they can apply for a Tax Exemption from the Tax Exemption Board; however this provides little comfort as it is not guaranteed and could change depending on the whim of politicians and/or a change of government.
Personal Tax Policy
This can be an issue for all taxpayers; however, as all workers will be subject to local tax policy it will appear unusual that the tax policy for employees was frozen in December 2000, therefore representing an older tax scale than that which currently applies in the USA. This may not be an issue, except when you consider the benefits that US taxpayers have enjoyed subsequently, none of which have been passed on to the American Samoan taxpayer, This is a major concern when attempting to employ mainland Americans.
Immigration Policy
Given the small population of American Samoa, it is inevitable that some specialized roles cannot be filled from existing resources, and in the case of lower paid jobs, such as tuna canneries, it has proven problematic, at best, to recruit from the local population. However, immigration reform should not favor expatriate workers over American Samoan workers. Immigration reform should seek to reform the guest worker renewal process, and modify the permit timeframes to match contract time periods. Small changes like these two recommendations can have big results in the area of immigration reform.

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