FSM one step closer to implementing comprehensive tax reforms

The National Tax Reform Task Force recently concluded its nationwide consultations, marking an important step toward modernizing the nation’s tax system. Photo courtesy of FSM government/Facebook

By Pacific Island Times News Staff

Palikir, Pohnpei—The Federated States of Micronesia proposes to impose value-added tax, which is among the components of the nation’s tax system reform aimed at strengthening the national economy and enhancing government service delivery.

The National Tax Reform Task Force recently concluded its nationwide consultations across the four states, marking an important step toward modernizing the nation’s tax system.

Proponents of the tax reform said the initiative was designed to enhance the FSM government’s capacity to fund essential services such as climate change, healthcare, infrastructure and social programs.

Revisiting the value-added tax proposal, the task force agreed to explore legal and practical solutions that could make its implementation constitutional, feasible and equitable.

  “As a percentage of GDP, the FSM has one of the lowest tax rates in the Pacific, but the impact of any tax increases should be carefully analyzed before they are implemented,” according to a press release from the FSM government.

The tax force, led by Vice President Aren Palik, emphasized that the proposed value-added tax would not affect state-imposed fees.

Since November, the tax force held a series of consultations with Pohnnpei, Yap, Kosrae and Chuuk, which provided a platform for open dialogue, allowing stakeholders to share perspectives, raise concerns, and contribute recommendations related to tax reform and domestic revenue mobilization.

“The consultations highlighted the need for strong coordination among the national government, state governments, and the private sector to advance shared economic and development objectives,” the task force said.

Pohnpei, Yap, Chuuk and Kosrae leaders have expressed support for the tax reforms, which they believe will “serve the nation’s long-term interests.”

They emphasized the importance of robust public education prior to implementation. 

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