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Congress Passes Renewal Of Rum Tax

Sept. 24 2004 — The U.S. Congress passed a bill Thursday renewing for two more years the rum tax that feeds tax dollars into V.I. government coffers.
According to Delegate Donna M. Christensen, the rum provision temporarily extends the current formula whereby the territory receives $13.25 per proof gallon of rum shipped to the mainland, while the U.S. Treasury keeps 25 cents of the excise tax.
"Our efforts to get the remaining 25 cents continue," Christensen said.
The territory will gain an additional $40 million in revenues over a two-year period from the bill, Gov. Charles W. Turnbull estimated in February.
He said in a press release Friday, "I am extremely pleased by the action of the Congress in approving this extension. The extension is an important part of our budget and will allow us to meet our obligations to fund critical environmental infrastructure improvements and to achieve compliance with federal laws."
He mentioned specifically the construction of two wastewater treatment plants – one on St. Thomas and one on St. Croix.
According to published reports, the $20 million additional revenue will make the Virgin Islands' annual rum tax revenue between $70 and $80 million.
The battle to retrieve a greater share of the tax has been going on for years. Congress first imposed the tax in 1984, in response to a scheme developed by Puerto Rico to "redistill" alcohol originally distilled on the U.S. mainland in order to increase the commonwealth government's share of the federal taxes.
As part of that 1984 legislation, Congress shut down the "redistillation" program and set the portion of rum taxes to be returned to Puerto Rico and the Virgin Islands at $10.50. It was later raised to $11.30 and then, in 1999, to the current $13.25.

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