May 4, 2001 – The Virgin Islands is apparently losing millions of dollars in uncollected excise taxes, according to an audit by the U.S. Inspector General's Office which was released Friday.
Excise taxes are levied on all merchandise brought into the territory for resale or for use in a business. Rates vary according to the type of product, ranging from 2 percent on such items as clothing and medicine to 25 percent on cigarettes. In fiscal year 1999, the territory collected $15.8 million in excise taxes.
The audit report states that in a two-year period, the Internal Revenue Bureau processed 254 credit claims totaling $2.3 million without verifying the accuracy of the claims. The auditors took a second look at a sampling of 35 of the cases and concluded that $672,906 worth of them were not adequately supported and that another $195,590 of them were in excess of taxes paid.
Auditors also verified that the government has abandoned its attempt to collect excise taxes on goods brought in through the U.S. Postal Service and intended for resale by local merchants. It seems the merchants ignored claims for taxes, and the IRB gave up because of a lack of staff and vehicles.
From October 1997 to March 1999, tax enforcement officers who visited the territory's post offices got no responses to 1,111 tax declaration forms they sent out to businesses for the payment of excise taxes. By December 1999, tax enforcement officers stopped their periodic post office visits.
If the IRB is verifying excise tax returns, the audit report says, there is no proof of it. Tax-enforcement officers are supposed to check the arithmetic and write "verified" and their initials on the form. But auditors found no markings. They did their own calculations on a sample of 852 returns, and found that 55 of them, or 6 percent, had errors. Of those errors, $3,500 worth were in favor of the taxpayer, and $1,140 were in favor of the government.
The auditors also found that the IRB's excise-tax unit was not properly supervised or computerized and that tax collections were not deposited on a timely basis.
In his formal response to a draft of the findings, included in the final report, Gov. Charles W. Turnbull concurred with the audit recommendations for improvements.
Based on that response, the Inspector General's Office's lists its recommendations as "resolved by not implemented."
And it notes that in a 1987 audit, it had identified similar problems.
