Revenue leaks: $111 million and more
All tax revenue, according to the American humorist P.J. O’Rourke, is the result of holding a gun to the taxpayer’s head. “Not paying taxes is against the law. If you don't pay your taxes, you'll be fined. If you don't pay the fine, you'll be jailed. If you try to escape from jail, you'll be shot.”
So pay, we do. In many cases, we overpay. Thus we raise our eyebrows when Adelup boasts about itself each time it releases our tax refunds— our own money.
On top of the income tax that we pay every year, we also pay all sorts of taxes — some of them written in fine print or passed on by businesses to consumers — just so we can live our lives. To wit, liquid fuel tax, water and electricity tax, tobacco and alcohol tax, property tax, vehicle registration fee, credit card surcharge, trash collection fee, business privilege tax for business owners and use tax for importers, among others.
When the business privilege tax rolls back from 5 percent to 4 percent at the end of September, the 2 percent sales tax kicks in on Oct. 1.
While already being subjected to tax dystopia, we wonder why the government of Guam is always scrounging for money; it’s always looking for areas to levy a new tax if not attempting to borrow more on the bond market. As of 2018, GovGuam is buried in $2.3 billion debt, entailing an annual debt service of $80 million, which accounts for more than 10 percent of the government’s $688 million budget.
The Guam Supreme Court recently shut down Gov. Eddie B. Calvo’s petition for the judiciary to force the Legislature to pass a bill that would allow the governor to borrow $75 million a year for three years. But you see, while the three branches of government cannot hold a gun to each other’s head, the government, collectively, can poke the gun at us when they want to pull a highway robbery.
We are aware that the perennial public deficit is the result of lack of equilibrium in the government’s fiscal playground. GovGuam overspends and underperforms. While the general population is overtaxed, the privileged sector is undertaxed. And based on the Office of Public Auditor’s reports, generous tax exemptions are exacerbated by the Department of Revenue and Taxation’s dismal tax enforcement and collection.
Three of OPA’s most recent audit reports alone estimated a combined total of $111 million in tax leakage and foregone revenue a year. These estimates were based only on records that were actually available and accounted for.
In its December 2017 report, OPA noted that GovGuam missed out on $70.2 million in potential revenue due to gross receipts tax exemptions that had limited review or oversight. OPA noted the lack of official reporting of tax expenditures to substantiate the cost-benefit of such preferential tax provisions.
In its May 17 report, OPA found $40 million in property tax revenue hole resulting from unexplained credits and anomalous exemptions granted to private entities — many of them were unidentified in the tax roll — from 2012 to 2016.
In its most recent report, OPA found that only 1 percent of imported tobacco is taxed and collected upfront by the Customs and Quarantine Agency because the law allows five wholesalers “authorized by DRT to delay tax payments on the tobacco stored in a warehouse under bond.”
Due to lack of data, OPA had no way of knowing what fraction of the remaining 99 percent may have been collected or fallen through the cracks. OPA’s analysis of Rev&Tax’s data on tobacco tax indicated an underpayment of $142,000 by one taxpayer alone.
The total amount of revenue leakages identified in these three audits could go up if OPA could quantify the amount lost to ghost exemptions and under-the-table transactions. At any rate, $111 million — plus the unquantified amount from mysterious credits and exemptions — would have covered the $67 million shortfall created by the federal tax cuts and the $75 million that governor wanted to borrow for the hospital.
Speaker Benjamin Cruz won’t take any more excuses from Rev&Tax, reminding tax officials that the Legislature has appropriated for over 40 vital positions to help plug the leaks.
In a nutshell, there is money right under the government’s nose. So quit poking the gun at us.