Senator hits discriminatory tax policy against Guam military contractors

By Pacific Island Times News Staff

Sen. Shawn Gumataotao came to the defense of Guam’s military contractors, who are being taxed at a higher rate than other local businesses.

 “Why should a Guam company doing construction work for our military be taxed at a higher rate than the same company doing the exact same work here for anyone else?” he asked.

While the business privilege tax is scheduled to roll back to 4 percent in October for most Guam businesses, the 5 percent rate continues to apply to defense contractors in the current fiscal year.

Shawn Gumataotao

The proposed budget for fiscal 2027 retains the same BPT structure.

At Friday’s budget deliberation, Gumataotao failed to gain enough votes for his amendment to remove a provision that imposes a 5 percent BPT on military contracts from the governor’s Bill 1 (S-10).

“I opposed establishing a higher tax rate for military contractors a year ago and I oppose this latest attempt, in my opinion, to define this legislature as anti-military, anti-jobs and anti-family,” he said. “I will not settle for repeated attempts to treat the important investments that are made in support of our nation’s war fighters as a gold rush.”

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The National Defense Authorization Act authorizes an annual average of $1.8 billion worth of defense projects for Guam.

As of 2025, the Department of Defense's investment in Guam has reached $3.9 billion, according to the U.S. Government Accountability Office's report.

Last year, the governor's office announced that the Department of Defense's expansion is projected to entail more than $5 billion in new construction projects on Guam in the next three to five years.

The government of Guam, however, has not quantified the actual amount of revenues earned from military contracts.

In 2023, the Office of Public Accountability reported that several federal contractors undertaking millions of dollars worth of military projects on Guam are either not locally licensed to operate businesses or not filing their taxes, resulting in approximately $22 million in tax leakages.

Gumataotao said he worked for a Fortune 100 company that "has done, and continues to do, a great deal of work" on Guam.

The Republican senator previously worked as a managing partner for GET, LLC, a Guam-based consulting and specialty construction materials and supplies firm.

"They have followed every Guam law and paid every Guam tax, as did all of their local subcontractors," Gumataotao said.

"I have also been part of a Guam small business that grew exponentially through work on our military installations—growth that meant taking on more responsibility, more risk and more direct contracts of our own, rather than staying content as someone else's subcontractor for what seemed like forever," he added.

Gumataotao said the governor’s BPT proposal tends to penalize successful local companies

"We should not be writing our tax code to punish the exact moment a local business reaches for something greater," he said.

"If we are serious about the structural, long-term fiscal discipline this administration says it wants, we should not be building next year's budget on a temporary construction boom that these very same officials will tell you, in the next breath, cannot be counted on to last."

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