Alaska Fisheries Tax Still in House Committee; Hearing Explored Raising Revenue by Closing Loopholes
SEAFOODNEWS.COM by Peggy Parker – March 9, 2016
In yesterday’s final hearing on HB251, a bill that would raise fisheries landing and business taxes, legislators examined in greater detail industry alternatives that could result in the same additional revenue by closing some of the current regulation’s loopholes and streamlining the tax collection process.
More than a dozen members of industry testified by phone and email.
The Pacific Seafood Processors Association offered the only alternative proposal for raising taxes, but suggested loopholes in the current regulations should be closed first.
“If the Legislature decides to increase taxes on the resource based industries, we request that first loopholes in the existing fisheries tax collection system be closed before any new taxes are added,” PSPA’s proposal stated.
“Closing known loopholes could raise up to $4 million in additional annual revenue. Once loopholes are closed, the need for new taxes should be re-evaluated,” the group added.
Committee chair Louise Stutes asked Vince O’Shea, vice president of PSPA who was in the room to listen, if he would explain that comment in more detail.
O’Shea described two loopholes. The first is how the state calculates the value of fish deliveries against which the tax is levied.
“ADF&G calculates an average statewide fish price, by species, based on processors input,” O’Shea said. “For some species, which are delivered to our shore plants in a form that we can’t turn into edible product, we run them through the meal plant. In the case of small amounts of yellowfin sole, for instance, that’s a product we put a 2 cents a pound value on.
“But there is a targeted yellowfin sole fishery offshore and their value is between 16-18 cents a pound,” O’Shea explained. “The tonnage is some 298 million pounds.
“Atka mackeral is another targeted species, where the statewide average fish price is 10 cents/lb. but there are estimates that the at-sea processors [price] is 32 cents. Total tonnage in that directed fishery is 69 million lbs.,” he said.
“People aren’t doing anything wrong,” O’Shea was quick to add. “Frankly it’s a technical gap in the system, and before we raise taxes, we’re saying let’s close the loopholes and get everyone on a level playing field.”
A second loophole is when payment for fish deliveries is made in two steps, first during the season and later, after the product has been sold in the market.
If the processing company is structured as an LLC, or has investment from its fleet into the plant, the second payment may be made as “dividend” and exempt from the fish tax.
If the Legislature decides increased taxes are needed, PSPA’s recommendation is that “HB 251 should be amended to a straight 4% for the fisheries business and resources landing taxes as illustrated on the enclosed chart. That proposal would raise approximately $14 million.”
An important caveat of PSPA’s recommendation was to adequately fund ADF&G and ASMI.
“We also request that if or when the Legislature increases taxes, the ADFG Commercial Fish Division and ASMI retain sufficient funding to continue to provide the baseline work that is necessary for our industry to be successful in Alaska. We rely on accurate forecasting for the maximal sustained harvest levels in our fisheries and to assist in a coordinated market strategy for all of our fish products,” the group concluded.
Deputy Commissioner of ADF&G Kevin Brooks was asked if there are foregone harvests, and subsequent foregone revenue to the state in fish taxes.
Represenative Ortiz addressed Brooks: “No one is happy about increased taxes. Are there foregone harvests now that, if they were eliminated, would make HB251 unnecessary?”
Brooks responded: “Yes, there are foregone harvest in areas, for many different reasons. One of the reasons is a conservation concern on chinook salmon that could result in foregone harvest on sockeye.
“ADF&G’s ability to precisely manage stocks, as we see budget reductions, we become more conservative,” Brooks explained. With less information to precisely time returns to certain rivers, Brooks said Fish and Game “will manage for sustained yield and escapement. And sometimes that results in foregone harvests.”
The PSPA alternative, dubbed “4 X 4” suggests a flat 4% rate for the business tax, the landing tax, the canned salmon tax, and the floating processors tax in state waters. Their proposal is estimated to raise an additonal $14 million, and with additional revenue of about $4 million from closed loopholes, would equal the revenue generated by HB251.
Rep. Jonathan Kreiss-Tomkins asked the Department of Revenue for a report that breaks out taxes paid by sector of fisheries and by species. Deputy Commissioner Jerry Burnett agreed to submit the report as soon as possible.
The Alaska Legislature is now in its eighth week of 13 weeks, with an adjournment scheduled for April 17, 2016. Last year the Legislature went into two special sessions, the last one ending November 5, 2015. If a Special session is called for this year, it will be from May 21 to June 11, 2016.
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Alaska Journal of Commerce by DJ Summers – March 9, 2016
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Labeling and Marketing
Seafood Expo 2016: Selling seafood to Millennials
SN Social by Liz Webber – March 9, 2016
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