The government of Guam lost $65 million in uncollected use tax due to flawed and deficient process, according to the Office of Public Accountability.
OPA cited deficiencies in its manual processes including: the control, assessment, and recording of incoming cargoes; recording of assessments, exemptions, and collection of use tax; and data interface.
In calendar year 2018, CQA’s Air Cargo Operations received incoming cargoes worth $1.6 billion.
Without considering all exemptible cargoes, the use tax rate of 4 percent, if collected up front, could provide GovGuam approximately $65.5 million of use tax revenues. However, based on existing laws and CQA’s professional judgment, GovGuam only collected $136,000 or 0.2 percent from air cargo in CY 2018.
The deficiencies noted were due to inadequate oversight, monitoring, and coordination of its key players—Customs and Quarantine Agency (CQA), Department of Revenue and Taxation (DRT), and Department of Administration.
In their official responses, all three agencies agreed and expressed their ideas in ways to move forward to address the issues noted. CQA is currently in the process of procuring a Customs Management Information System that has various capabilities including receiving all airway bills and manifests electronically and will greatly help in the automation of Use Tax assessments, tracking of exemptions, and more.
The OPA made twelve recommendations, collectively, to CQA, DRT, and DOA including to aggressively pursue the acquisition of a CMIS to minimize, if not eliminate, manual processes that waste resources due to inefficient processes and solve all other relevant issues which deprive GovGuam of its true use tax revenue.