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Pacific Islands Development Program, East-West Center

With Support From Center for Pacific Islands Studies, University of Hawai‘i

Air Marshalls Hit With $1.4 Million In Back Taxes
Judgment comes as airline announces new plane purchase

By Giff Johnson

MAJURO, Marshall Islands (Marianas Variety, Dec. 10, 2012) – The same week that Air Marshall Islands officials announced plans to buy another airplane, the High Court ordered the government airline to pay more than $1.4 million in back taxes to the nation’s retirement fund.

Chief Justice Carl Ingram issued the judgment Friday saying that there is "no dispute" over the amount Air Marshall Islands owes in retirement and health fund taxes for the period from early 2011 through September this year.

The total due is $1,411,984.66, a figure that includes penalties for lack of payment.

"AMI is legally obligated to pay the contributions under the Social Security Act of 1990 and the Health Fund Act of 2002," said Ingram in his ruling. "However, AMI’s obligation is not just a legal one, it is a moral obligation. Without payment of the contributions, AMI’s retired employees and their survivors may not receive the benefits to which they are entitled and the Ministry of Health will have fewer funds to meet the health needs of the people of the Marshall Islands."

Earlier in the week, airline officials announced plans to buy a Dornier 228 aircraft that is in Nairobi, Kenya for $1.4 million. The 1986-vintage plane is an earlier model from a Dornier that the airline currently operates for domestic service. But the purchase has sparked controversy, with airline board members angered over politicians making the decision to buy the plane and aviation experts saying the plane is old and a model from which the airline upgraded because it was found to be "not suitable for this environment."

Meanwhile, AMI is now subject to a court order to pay the $1.4 million tax debt. Chief Justice Ingram ordered Attorney General Filimon Manoni and Social Security lawyer David Strauss to "meet, confer and in good faith attempt to reach agreement on the payment of the judgment."

To encourage AMI to make the payment, the judge set interest on unpaid taxes at nine percent per year.

The airline also reportedly owes about $1.5 million to an Australian firm that has been performing heavy maintenance on the airline’s Dash-8 plane since earlier this year. The plane is anticipated to return early in 2013 after payment is made.

Air Marshall Islands is one of several state owned enterprises that recent Asian Development Bank and International Monetary Fund reports say has been draining the financial resources of the government through large annual subsidies.

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