Special rules (section 1294) provide for the monitoring of prices consequent upon the introduction of PGST. It is intended to ensure that there is no unjustified increase in prices in Palau during the transition to PGST.
These rules apply to the supply of goods and services in the period July 1, 2022 to December 31, 2023. These supplies are referred to as a “regulated supply”.
The introduction of PGST (and other tax reforms) will have an impact on prices. However, businesses must be careful to make any price changes taking into account the overall impact of the tax changes. For example, a PGST registered person may claim PGST input credits for many expenses they incur in carrying on their business. Also, the reduction in import duties and carbon tax may also impact on their prices.
A person making a regulated supply commits an offence if a regulated supply is made for a price that is excessive having regard to:
- The introduction of this chapter – imposition of PGST and other measures.
- Changes in the rate of import tax (including the reduction of import tax to 0%) or any other tax as a result of the introduction of Chapter 12.
- The person’s costs.
- Supply and demand conditions in the market.
- Any other relevant matter.
The penalty for making a regulated supply for an excessive price is a fine not exceeding ten thousand dollars ($10,000) for the first breach of this subsection and a fine not exceeding twenty thousand dollars ($20,000) for the second and each subsequent breach.
A person would not be subject to this penalty if the excessive pricing was due to reasonable mistake and the supplier can demonstrate that the supplier took all reasonable steps to avoid contravention and exercised due diligence in their pricing.
The Director may publish guidelines to assist suppliers in setting prices for regulated supplies.
The Bureau of Revenue and Taxation will work with other Government agencies to monitor prices and take appropriate action to prevent excessive price increases during the transition to the PGST