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Written by Alonzo Kahalik
alkahalic6801@gmail.com
Dear Editor,
“The illusion of the Palau Government Stress Tax (PGST): robbing Peter to pay Paul”
Recently, I overheard a conversation where one person assured another that the Palau Government Stress Tax (PGST) was perfectly acceptable because the taxes paid would be returned to citizens in the form of rebates.
However, this view reflects a fundamental misunderstanding of how taxes and tax refunds work. Let’s analyze why this approach is problematic and how it affects the citizens of Palau. First, let’s understand the mechanics of the PGST. Under this system, all goods purchased in Palau are subject to a 10% tax. Crucially, this tax is not absorbed by businesses; instead, it is passed on to consumers. When you buy an item, you pay an additional 10% tax on top of the price of the item. Businesses collect this tax from you and pass it on to the government.
Now, the government has taken your money and promised to give it back to you. This cycle raises an obvious question: Why take money in the first place and then give it back to you later? This approach is akin to robbing Peter to pay Paul. It creates the appearance of financial assistance while actually just giving you money that is yours.
No one has ever done a comprehensive survey to determine how much we spend and how much we get back. Therefore, claiming you get all your money back is misleading and almost a lie invented to make the government look good. The truth is, no one is asking the government to make citizens bear this tax just to fill the coffers and then pretend to be doing us a favor. As the saying goes, “Please don’t pee in my lap and then say it’s raining outside.”
This sentiment is especially directed at OEK leaders who voted for this tax and are now complaining. Necessities like food and water should not be taxed. These necessities are more expensive now than they were four years ago, and our leaders blame external factors like Putin’s actions for the price increases. The fact is that our leaders were not prepared for the consequences of a tax in a small economy like Palau. The fundamental issue here is the financial burden on citizens. By imposing this tax, the government is forcing people to pay more for everyday items. While it may appear that you are getting your money back, this process does not take into account the time value of money. The government is holding back your money for a period of time before returning it, during which time you could have used it for emergency needs or savings. This delay in returning it can put a strain on household budgets, especially for those who live paycheck to paycheck.
Another key point is the economic impact on local businesses. While businesses do not pay taxes directly, the increased costs to consumers may reduce overall spending. When people have to pay more for goods and services, they may cut back on non-essential purchases. Reduced consumer spending could hurt businesses, especially small and medium-sized enterprises that rely on local patronage. In a small economy like Palau, this could have a ripple effect, leading to slower economic growth and potential job losses. The PGST also fails to address the fundamental problem of generating sustainable government revenue. Instead of implementing a tax system that burdens citizens and creates a cycle of taxation and rebates, the government should explore more efficient and equitable ways to raise revenue. This could include measures to broaden the tax base, improve tax compliance, and promote economic activities that generate long-term growth.
For Palau to prosper, its leaders must adopt policies that truly benefit the people. This means not only ensuring financial stability, but also fostering an environment where businesses can thrive and citizens can maintain a decent standard of living. The PGST in its current form fails to meet these criteria. As a citizen, I want my government to find innovative ways to generate revenue without burdening the people. This is why we elect leaders – to get the job done while we are busy working to feed our families. This is representative democracy, not “representative democracy madness.” Our leaders should not underestimate our ability to see through their political gamesmanship and self-propaganda.
In conclusion, PGST is a misguided policy that puts unnecessary financial strain on citizens in the name of fiscal assistance. Where are the new ideas of our leaders on economic growth?
I
Alkahalik
Posts The silent majority First appeared in Island Times.
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