Business group slams administration for inflating bureaucracy while private sector is mired in depression
By Mar-Vic Cagurangan
The Guam Chamber of Commerce on Thursday asked the administration to roll back the business privilege tax to its pre-2018 level, saying the private business sector has not been getting any reprieve from the impact of the Covid-19 pandemic.
While resenting the sparse government support throughout the pandemic, the chamber lambasted the administration for hiring new people and inflating bureaucracy while the private sector is struggling to stay afloat.
"It is imperative that relief be given to ensure that this tax base is preserved," the chamber said in a press statement.
The BPT was raised from 4 percent to 5 percent in March 2018 to help the government bridge the projected $67 million funding gap created by the Tax Cuts and Jobs Act of 2017.
"What has manifested over the last couple of years is that there was little to no impact on government collections, and this additional 1-point increase (25 percent) has been the source of collections well over the government’s need to support its operations," the chamber said.
Gov. Lou Leon Guerrero earlier maintained she was not inclined to cut the BPT, repeatedly saying she wanted the tax rate to remain at the current level "forever."
The chamber, however, appealed to the administration for relief. "The struggles of our private sector and the surplus amounts collected over what is actually needed for government operations call for immediate rollback of the 25 percent increase," the group said in a statement.
In an audit report released in June, the Office of Public Accountability reported that GovGuam's general fund ended fiscal 2020 with a $46.3 million surplus.
A severe economic disruption caused by the Covid-19 pandemic virtually closed the private sector. As a result, OPA said, GovGuam collected $18.4 million less revenue from BPT-- down from $315 million in FY 2019 to $296.5 million in 2020.
The chamber noted that the hope for economic recovery this year hit a snag due to the resurgence of community infections triggered by the delta variant.
"The health and safety of our people are paramount. However, we must not forget the financial and social well-being of individuals and families in the process," the chamber said. "As we consider planning for the next fiscal year, there are still thousands of our people unemployed."
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The federal unemployment aid under the Pandemic Unemployment Assistance program and the locally-designed RISE Act program provide temporary relief to residents worst hit by the pandemic. But without jobs to go back to, the programs' expiration will leave the people scrounging for resources.
"The ability of our people to be employed in the private sector rests on the capability of businesses to offer jobs. Many in the private sector have already closed their doors permanently," the chamber said.
"Their employees cannot come back. Many establishments are still struggling with keeping their doors open. As the virus continues to affect tourism and our economic activity, these businesses may make the difficult decision to fold, which means more jobs lost."
The chamber said while the business sector is mired in depression, GovGuam is operating in its typical spendthrift manner.
"While businesses scaled down operations or closed doors entirely, the government of Guam hired new employees and stood up new offices," the chamber said. "While the private sector was frantically trying to keep workers employed, the government continued to increase salaries and wages for its employees."
While expressing support for merit increases for personnel across all sectors, the business organization said implementing government pay raises is ill-timed when the rest of the population is struggling.
"It is critical during this current climate of depressed economic activity that the government support the sector which funds its operations," the chamber said.
The chamber said the private sector businesses and employees provide the largest contribution to the general fund, yet GovGuam offered them minimal support to withstand the losses of economic activity.
On Sept. 1, the minimum wage increase went into effect after a six-month postponement. The new hourly wage will go from $8.75 an hour to $9.25 an hour.
"While the private sector appreciated the brief moratorium on the implementation of the minimum wage and increasing the threshold to the Dave Santos Small Business Act, the truth is, this is not enough," the chamber said. "These small concessions from our local government have not been enough to keep doors open and jobs available."
The chamber welcomed the spending cut in the FY2022 budget bill, which has lapsed into law.
"We commend several sitting senators who held the line to reduce the entire budget by just over $50 million," the chamber said. "This is an important step to controlling government spending which ultimately is funded by the private sector."