Seafood Industry Asks to Cooperate with AK on Fish Tax Increase at Hearing; Current Effort Flawed
SEAFOODNEWS.COM by Peggy Parker – February 19, 2016
The House Special Committee on Fisheries heard from several members of Alaska’s seafood industry yesterday, all opposing HB251 “Electronic Tax Returns and Fisheries Taxes”, in its current form.
Shore-based operations that currently pay a 3 percent rate would go to 4 percent; salmon canneries business tax would increase from 4.5 percent to 5.5 percent, and floaters would go from 5 percent to 6 percent. This is not a “1%” tax increase, as put out by the Governor, but a 20-33% increase for many processors.
“The approach here is oversimplified,” explained Vince O’Shea of the Pacific Seafood Processors Association who represent most processors in Alaska. “It’s not a one percent tax increase, it’s a 33 percent increase to the vast majority of the fish landed in Alaska.
“It raises the tariff on canned salmon at a time when we’re having significant challenges already on that product in the market, from forces beyond our control.
“There’s literally a perfect storm in the seafood industry, and it’s been building in the last three years,” O’Shea testified.
“This year we’re working with a 26 percent increase in minimum wage. There has been a 20-30 percent increase in currency due to strengthening of the dollar. Our buyers in Japan, China, and the European Union need to keep shelf prices stable in their stores, which means we get paid 67 cents on today’s dollar compared to a few years ago,” he said.
“I appreciate the two hearings you’ve already held on this bill. The reason you haven’t heard much from us, we’re in a learning mode. We’d like to work together with you to find new revenue from the fisheries industry. The challenge is to do it in a way that does not harm to our industry, one that relies on a renewable resource and will continue to be an important part of a robust Alaskan economy in the future,” O’Shea concluded.
Bob Thorstenson, executive director the Southeast Alaska Seiners Association, registered strong opposition. “My involvement in raw fish tax comes from both the fisherman and processor perspective. The last time a major overhaul of the fish tax was done was 1982. There hasn’t been an ISES [Institute of Social and Economic Research] look at the raw fish tax or fisheries taxes as a whole,” he said. “I don’t know anyone who’s been contacted on the economic consequences of this.”
Thorstenson told the panel that the Bering Sea crabbers currently pay for “100 percent of the cost of management of that fishery,” referring to the argument for raising taxes is to offset management costs for the fisheries. “So do we have to pay twice?”
If the statute is to be changed, Thorstenson advised the panel to look at “the communities around the state that are lined up next to vast fishing grounds but don’t get a single penny from that resource. Any future taxes have to recognize where the fish are being caught, not only where they are delivered.” Under current tax law, fifty percent of the landing taxes go back to the borough or city where the fish were landed.
Under HB251 as written, none of the increased taxes would be shared with communities, but go into the state’s general fund exclusively.
In addition to the oral testimony, the panel received several written responses from the industry.
Joe Plescha from Trident Seafoods agreed with others when he wrote, “We understand the need to increase revenues and sincerely want to help in that process.
“But the Governor’s proposed increase on the seafood industry will result in an additional twenty-five to thirty percent increase in the seafood industry’s State tax burden. That increase is extremely large for an industry that is in the middle of difficult economic times.
“I humbly request you provide the seafood industry more time to consider the effects of the Governor’s proposed tax increase that would occur on the heels of (1) increased labor cost because of higher minimum wage rates; (2) large increases health care costs; and, (3) significant declines in wholesale prices in global salmon and whitefish markets.”
Seward-based vessel owner and direct marketer Rhonda Hubbard of Kruzof Fisheries, has been at each hearing held on the bill.
“We really do need more time on this,” she said. “The fisheries tax is really complicated, probably one of the most complicated taxes in the Department of Revenue.”
She was the only one who commented on the section of the bill requiring electronic reporting. “Electronic reporting will make things more efficient. There could be inconsistencies in between data from ADF&G and Department of Revenues, and that should be looked at.
“Another idea is why aren’t charters getting taxed? With more time and analyses on these issues, we can come up with something that will get the revenue up and be a lot more equitable,” Hubbard said.
Bob Kruger, executive director of the Alaska Whitefish Trawlers Association pointed out that an increase of taxes for both fishermen and processors will hurt new entrants to the fishery. “Additional tax burdens would be a disincentive for young people to get involved in the fishery. We know it’s inevitable that we’ll be burdened with additional tax debt, and we’ll deal with it. We just hope it’s equitable and reasonable.”
A fourth hearing on the bill will be held next Tuesday, February 23, 2016.
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