Internal Revenue Code
(IRC)
Guam and the Virgin Islands tax systems mirror the IRC,
that is, all provisions of the IRC are applied to them.
Each
time a change in the tax code occurs, it has a potential financlal
impact
on
these
territories,
For
example,
the
Virgin
Islands reported a potential loss of about $13 million in fiscal
year 1982 and an estimated $25 million in fiscal year 1983 due
to changes
in federal
tax rates and regulations.
Guam business
officials reported in 1982 that the mirror tax system has "sad-
dled Guam with an overly complex, inadequate revenue generating
capacity which imposes non-competitive tax rates which hinder
efforts to attract foreign and U.S. corporations to Guam."
They
believe the IRC places Guam at competitive disadvantage with
Pacific-Asian neighbors with lower tax rates, and that Guam
should be allowed to adopt its own income tax system.
Similar
concerns were voiced
by NMI
officials,
who believe the IRC
is
inappropriate for their local situation.
The NMI has successfully deferred implementation of IRC provisions until January 1,
1985.
At
the
time of our review,
the
Department
of
Treasury was
studying tax treatment of these territories to develop a mutually satisfactory tax system.
Other problems
A government of Guam Planning Office analysis in
tified
38
different
labor and wages,
tax,
federal
laws
communication,
Guam's economic development.
and
regulations,
and others,
1982 iden-
including
as constraining
Guam and NMI also cited the Clean
Air Act as an example of a federal law which was based on state-
side conditions which are not appropriate for a small island
with prevailing tradewinds.
Guam faced costly decisions to
either burn expensive low sulfur fuel or to install $20-million
scrubbers on its power plants.
After years of arguing its case,
Guam received a temporary exemption from the Clean Air Act under
provisions
of
the
1983
Territory
Omnibus
Act
(Public
Law
98-213).
.
FEDERAL EFFORTS TO
ADDRESS LAW PROBLEMS
In the early 1950s, Congress authorized separate laws commissions fcr Guam and the Virgin Islands to identify federal
laws hampering their development.
Both commissions were shortlived, but’ some law changes resulted from their recommendations.
Since 1980, efforts to remedy problems with federal laws include
in
1980;
32
9006239
;
YE an ot he aR.
--creation of the Northern Mariana Islands Laws Commission