Guam senator proposes two-pronged business tax structure
- Admin
- Jul 14
- 3 min read
By Pacific Island Times News Staff
Proposing an amendment to the business privilege tax cut bill, Sen. Telo Taitague suggested a two-pronged structure: 5 percent for all military-related defense contracts and 4 percent for the rest of Guam's private sector.
“The amendment does not raise taxes; it simply ensures the tax cut is focused where it’s truly needed: on Guam’s local businesses," Taitague said.
“Tax relief should go to those who need it, not those making tremendous profits from the military buildup,” she added.
Authored by Sen. Shawn Gumataotao, Bill 11-38 proposes to roll back the BPT rate from 5 percent to the pre-2018 level, which was 4 percent.
The amendment adds a new subsection to ensure that companies benefiting from massive and ongoing U.S. Department of Defense construction projects, including both prime contractors and their subcontractors, will continue paying 5 percent BPT even as all other businesses are granted tax relief.
“This amendment draws a clear line,” Taitague said. “If you’re a business that’s barely holding on after years of economic hardship, you deserve relief. But if your profits are driven by billions of dollars in defense spending and you are profiting from multimillion-dollar defense contracts, you can afford to keep paying your share.”
Over the next three to five years, military construction on Guam is expected to exceed $5 billion, driven by large-scale projects like a 360-degree missile defense system, major facility upgrades, and expanded defense infrastructure.
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Taitague noted that while military investments reflect Guam’s strategic importance, their economic impact is concentrated in a small corner of the local economy.
The senator noted that many contractors tied to defense projects are from off-island firms with significant profit margins, and most local businesses, especially in tourism, retail and services, remain in a fragile position.
“We all appreciate the jobs and benefits these projects bring,” said Taitague, chair of the committee on economic investment.
“But this construction boom is not the same as economic recovery. Most businesses in Guam are still recovering from the pandemic, and they’re the ones who need the break."
With the looming federal spending cuts, Taitague stressed the need for Guam to find a balance between providing tax relief and keeping GovGuam afloat.
She argued that companies performing defense-related construction and services on Guam have already accounted for the 5 percent BPT in their bids, budgets and profit calculations.
The vast majority of current and upcoming projects – including multibillion-dollar task orders tied to the Missile Defense System and other base expansion efforts – were proposed and awarded under the existing 5 percent tax rate.
Taitague noted that the current BPT rate is not an unexpected cost as it is already built into their contracts and recoverable through federally approved profit margins.
"This amendment does not impose any new burden; it simply maintains a tax rate that is already part of their financial planning and accepted in their contractual agreements,” she added.
“At a time when the government of Guam faces mounting fiscal pressures and many local businesses are still struggling to recover, this policy ensures the island retains critical revenue without harming the viability or profitability of military construction,” Taitague said.
Gumataotao earlier noted that GovGuam’s latest data estimates the general fund will collect $55 million above adopted levels by Sept. 30, which includes $13 million in excess of the adopted BPT level.
“While the government of Guam might be flush with cash, it’s been a completely different story for our businesses - entrepreneurs who have sacrificed so much by believing and investing in Guam,” Gumataotao said.
“There are many companies, comprising thousands of women and men who are the backbone of Guam's economy, that could have been helped if the lower BPT had been restored sooner.”
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