Guam faces tax collection need as Trump cut hits bottom line
Guam Public Auditor Doris Flores Brooks and Llewelyn Terlaje
It’s pretty clear already that the massive tax cuts for which President Trump and his Congressional supporters are loudly claiming credit are going to starve local U.S. jurisdictions including Guam as millions in federal funding is lost.
But how do you solve this problem if your local tax collector can’t produce reliable data describing the situation accurately?
A recent roundtable discussion at the Guam Legislature attempted to make sense of this dilemma leading to a discussion of how local priorities such as the rehabilitation of Guam Memorial Hospital are to be funded as lawmakers take a hard look at various tax exemptions that have been created over the years and the relative effectiveness of the government in collecting taxes that are legally due.
The prospect of the Business Privilege Tax being eliminated and other exemptions being trimmed back brought numerous Guam business representatives to the hall though that wasn’t directly the issue at hand.
Much of the fuss was caused by a recent report from Guam Public Auditor Doris Flores Brooks, which concluded that over the past three years, a total of $210 million in potential GRT was not collected because of the more than 40 exemptions granted to various island businesses. That audit has already resulted in a GMH funding bill introduced by Gov. Eddie Baza Calvo, which would end GRT exemptions granted to wholesalers, banks, hospitals and insurers.
“Please don’t shoot the messenger because you don’t like the message,” said Brooks. “We always talk about tax collections, tax revenues, but we don’t always talk about, what has the government of Guam given away in the form of tax credits, tax exemptions and so on.”
Brooks said outside observers, dating back to at least 2008, have concluded that the Department of Revenue and Taxation can’t do its job due to shortages of funding, staff and ancient computer technology dating back to the 1980s. The resulting data is unreliable but she said it’s clear that wholesale is the epicenter of the problem. “The foregone revenue comes from wholesale and we have over 40 exemptions of which $11 million in exemptions, nobody knows who got it because of the way the system is.”
Brooks cited a 2014 U.S. Interior Dept. Inspector General audit: “They identified six contractors who may possibly owe the Government of Guam $414,000 in gross receipts tax because DRT’s system of identifying is ineffective.”
John P. Camacho, Director of the Guam Department of Revenue and Taxation acknowledged some problems with data in 2012 and 2013, but he said the Division of Revenue and Tax keeps close track of the exemptions. Many problems could be solved he said, if businesses were motivated to file their reports on line. He said much money is being lost on poor collection of Guam’s already low property tax.
Legislators who must depend on Revenue and Tax numbers when preparing budgets also noted poor data connections between other relevant government agencies, such as the Department of Administration.
Senator Joe S. San Agustin: “When we’re trying to figure out the budget, we actually don’t know whether we can trust the numbers with which we’re presented when we can’t even see it ourselves.” Said Speaker Benjamin J. Cruz, “I don’t know why and you’ve admitted it several times, your divisions [within Revenue and Tax] can’t talk to each other.” Citing his own experience, Cruz said the filings not on paper get lost. “There have been times when I filed at business and they say ‘you didn’t file your gross receipts’ and then I have to go find my paper copy and I have to go up to prove it to you because BPT hasn’t seen it… Unless we have the paper to prove it, we’re dead.”
John P. Camacho
Senator Michael San Nicholas said the issue of tax exemptions deserves a closer look: “When we talk about how GovGuam quote-unquote loses in these exemptions, we also need to factor in how much these exemptions have helped to grow the economy and how much these exemptions have helped to keep the cost of living down.” This would include jobs provide jobs provided by island wholesalers and other contributions toward the economy through the facilities they must maintain.
Meanwhile, though the bill to end the GRT exemptions wasn’t on the agenda, a large number of wholesalers and other Guam business people waited patiently to have their say.
Frank Shimizu, president and CEO of the Ambros wholesale firm said the issue should be off-island distributors of products sold here: “Any time you increase the tax on anything, you’ve done a favor to these off-island wholesalers. The Navy Exchange can buy directly from the manufacturer, doesn’t have to go through a wholesaler.” And off-island brokers are also in the mix, operating out of California and avoiding any hiring or any other expenses on Guam. “Their overhead? Three employees, a rental office space and that’s it.”
If you want more revenue for Guam, Shimizu urged, get more efficient at collecting existing taxes such as the GRT at the retail level.
"You don't need higher taxes to fund GMH," Shimizu said. What's needed is the enforcement of taxes already in place.