Palau Sessional Legislation
To invest in a skilled Palauan citizen workforce by mandating the creation of a vocational certification program at the Palau Community College and creating a tax incentive for businesses to hire the said vocationally certified students, and for other related purposes.
THE PEOPLE OF PALAU REPRESENTED IN THE OLBIIL ERA KELULAU DO ENACT AS FOLLOWS:
Section 1. Short Title. This Act shall be known as and may be cited as, "The Skilled Palauan Workforce Investment Act."
Section 2. Presidential Statement of Introduction.
Pursuant to Article VIII, Section 12: "The President may introduce measures in the Olbiil Era Kelulau." Currently, foreign workers dominate certain sectors of the local economy, mainly in the skilled labor industries. Palauan citizens continue to be an underutilized resource within their own country. Certain policies must be pursued in order to reverse that trend. This bill is designed to mandate the Palau Community College to create a vocational certification program in which an emphasis is placed upon building technical skills that will translate directly towards employment in the area trained. It is the intent of this bill that the vocational certification program will develop Palauan citizens for employment in the areas of the economy that demand technical skills.
It will be essential to this program that the Palau Community College work with the business community to ensure that the certification is not just a piece of paper, but is actually something of value that the business community can rely upon with a reasonable degree of certainty that the individual in possession of the certificate actually possesses the skills that are on the certificate.
In addition, the bill makes an amendment to the tax code so that businesses who hire Palauan citizens with a vocational certificate may double the amount of salary claimed to be deducted before the Gross Revenue Tax is applied to the business. As a result, if a business were to employ a Palauan citizen at five thousand dollars per quarter ($5,000/quarter), then the business could claim ten thousand dollars per quarter ($10,000/quarter) to be deducted from the Gross Revenue to be taxed. This will provide an incentive for businesses to hire Palauan citizens and to hire Palauan citizens at higher wages. The tax incentive is designed to sunset fifteen (15) years after it goes into effect in order to evaluate its effectiveness and whether it continues to be necessary to promote the hiring of Palauan citizens.
Section 3. Legislative Findings. The Olbiil Era Kelulau acknowledges that there is a need to increase the number of citizens in skilled labor industries. The Olbiil Era Kelulau also finds that because the Palau Community College ("PCC") already has vocational programs, and already has various certifications to meet the different student needs, the pressing issue is the need to increase citizens' interest in the skilled labor industries. And the key to increase citizens' interest in this field is to provide some assurance that upon graduation or certification, attractive job opportunities and employment will be available to them. The Olbiil Era Kelulau further finds that a tax incentive would be the most appropriate mechanism to encourage employers in the skilled labor industries to hire certified Palauan citizens; and in turn, more citizens will be encouraged to enter this field of work. Therefore, it would be most appropriate to create this tax incentive and mandate PCC to establish a certification program specific to the tax break created by this Act. The Olbiil Era Kelulau also finds that since the Republic of Palau is a member to the United Nations Convention on the Rights of Persons with Disabilities; the tax incentives created by this Act shall be equally available for employers that hire persons with disabilities.
Section 4. Amendment. Section 301 of Title 22 of the Palau National Code is hereby amended to state as follows:
"§ 301. Established as a public corporation; purposes.
In accordance with any pertinent treaty, the College of Micronesia, its Executive Director and Board of Regents, is hereby established and maintained as a public corporation under the style of the College of Micronesia, comprised of the present Palau Community College, formerly known as Micronesian Occupational College, and such other schools as may be established by the Governing Board or as otherwise designated by law.
Palau Community College:
(a) . . .
. . .
(h) shall develop a strong vocational skills program with a focus on developing professional technical skills for automobile mechanics, boat mechanics, the construction industry, and any other industry in which technical skills and expertise is essential to success. In conjunction with the relevant private industries, the Palau Community College shall develop a vocational skills certification program, through which a certificate is issued to graduates of the program that can be reasonably relied upon by the private industry as proof of a certain level of competence that the private industry can rely upon in hiring Palau Community College vocation certified graduates. PCC shall undertake all reasonable efforts to ensure that only qualified students who actually possess the relevant technical skills are certified through the program."
Section 5. Amendment. Title 40 of the Palau National Code is hereby amended as follows:
"§ 1201. Imposition of tax on retail and wholesale businesses.
Except as otherwise provided by law, every person engaging in the retail or wholesale business shall be assessed and levied and shall pay a tax of four percent (4%) of the gross revenues of the business; provided that the entire amount paid in salaries to citizens who are residents of the Republic shall be subtracted from the gross revenues before assessing the tax under this section.
. . .
§ 1204. Imposition of tax on other businesses.
Except as otherwise provided by law, every person engaging in any business, trade, activity, or calling not specifically included in this chapter shall be assessed and levied and shall pay a tax of four percent (4%) of the gross revenues of the business, activity or calling; provided that the entire amount paid in salaries to citizen employees who are residents of the Republic shall be subtracted from the gross revenues before assessing the tax under this section."
Section 6. Skilled Labor Gross Revenue Tax Relief. There is hereby established a fifteen (15) year temporary gross revenue tax benefit to encourage Palau's skilled labor industries to employ more Palauan citizens as follows:
(a) Amount of Tax Relief:
(1) From January 1, 2015 until December 31, 2024, an employer may subtract an amount that is double the salary of citizen employees of the employer who possess vocational certificates from Palau Community College before assessing the taxes levied under Sections 1201 and 1204 of Title 40 of the Palau National Code.
(2) From January 1, 2025 to December 31, 2025, an employer may subtract an amount that is 175% the salary of citizen employees of the employer who possess vocational certificates from Palau Community College before assessing the taxes levied under Sections 1201 and 1204 of Title 40 of the Palau National Code.
(3) From January 1, 2026 to December 31, 2026, an employer may subtract an amount that is 150% the salary of citizen employees of the employer who possess vocational certificates from Palau Community College before assessing the taxes levied under Sections 1201 and 1204 of Title 40 of the Palau National Code.
(4) From January 1, 2027 to December 31, 2029, an employer may subtract an amount that is 125% the salary of citizen employees of the employer who possess vocational certificates from Palau Community College before assessing the taxes levied under Sections 1201 and 1204 of Title 40 of the Palau National Code.
(b) If an employer chooses to claim the Skilled Labor Gross Revenue Tax Relief under this Act, then the subtraction of citizen employee salaries in Sections 1201 and 1204 of Title 40 of the Palau National Code shall not apply.
Section 7. Effective Date.
This Act shall take effect on upon its approval by the President of the Republic of Palau, or upon its becoming law without such approval.
PASSED: April 18, 2014
Approved this ___24th__ day of ____ April__________, 2014
Tommy E. Remengesau, Jr.
President of the Republic of Palau