By Mar-Vic Cagurangan
While supporting twin proposals to expand the local government's tax cut eligibility for small businesses, the Guam Chamber of Commerce endorsed a version that proposes to make the program permanent.
Bills 202-36 and 177-36 both propose to raise the revenue threshold eligible for the 3 percent business privilege tax (BPT), from $250,000 to $500,000.
While the two measures may be similar in nature, they differ in the program's duration.
Sen. James Moylan’s Bill 177-36 proposes a temporary tax relief, "commencing on the first day of the month of the new tax year," and "shall end on the last day of the last month of the same tax year.”
On the other hand, Sen. Mary Torres’ Bill 202-36 would permanently expand the program, leading to the eventual rollback of BPT.
In 2018, Guam raised the BPT from 4 percent to 5 percent to fill the revenue gap created by the federal Tax Cut and Jobs Act.
However, what was initially projected as an interim solution to the revenue loss has been kept in place for five years despite the business community's repeated calls for its rollback.
Torres said she is inclined to pursue a BPT rollback for all businesses through a separate measure, Bill 22-36, which she previously filed.
“The Guam Chamber of Commerce supports the passage of either proposal with the recommendation that the legislation be amended to make the program permanent, as opposed to the temporary proposal offered in Bill 177-36,” Catherine Castro, the chamber’s president, said in her written testimony addressed to Sen. Joe San Agustin, chair of the general operations committee.
Bills 202-36 and 177-36 seek to amend an existing program authorized by Public Law 36-27, which currently provides small businesses a BPT reduction on the first $250,000 of their gross receipts. The program applies to businesses with a gross annual income of between $50,000 and $500,000.
“Put differently, this bill would allow our businesses to keep more of their hard-earned money,” Torres said in her opening statement prior to the bill's deliberation. “Bill 202 provides greater relief for the smallest of our small business community."
Castro said the potential savings from the proposed tax-cut expansion may not
be as big as businesses hope for, but it could ease pressure just the same.
“Contrary to what many believe, the savings provided by increasing the gross threshold from $250,000 to $500,000 is not significant,” Castro said.
“It roughly equates to $400 monthly. However, for a small company such as a coffee shop, consultant, bookkeeper, or an independent agent, it could be the difference in paying rent, utilities, an employee, or in some severe cases, keeping their doors open. The bottom line is that there will be a little more for companies to work with to grow their individual businesses.”
Approximately 750 small businesses stand to benefit from the proposed tax cut expansion, which was projected to cause a dent in the government's collections.
"We are certain the government’s concern is that the passage of this measure will result in an adverse fiscal impact of nearly $4 million annually," Castro said.
"The reality is that, while the public sector did not experience a payless payday at all during the course of this crisis, thousands in the private sector did," she added.