Tax leak: Why Guam is missing out on a windfall from defense contracts

Updated: Jun 4

In 2014 alone, the Office of Inspector General assessed $414 million in taxes owed to the government of Guam

For the government and the business sector, the military buildup promises economic salvation. However, the amount of defense spending on Guam is not reflected in the local tax revenue indicating a loss of millions of dollars in potential revenue.

Vice Speaker Tina Rose Muña Barnes is requesting Public Auditor Benjamin Cruz for an audit on taxes collected on military contracts. That is, if they were collected at all.

The contract undertakings are part of DoD's preparation for the relocation of 5,000 Marines from Okinawa to Guam. The troop realignment program is projected to cost about $8 billion, of which Japan has agreed to shoulder $2.8 billion.

In 2019 alone, the Department of Defense poured a total of $1.7 billion into Guam for construction projects and corresponding payroll, according to a report released this year by the Office of Local Defense Community Cooperation.

The military investments on the island accounted for 63 percent of DoD's $2.7 billion total spending in fiscal 2019 for five U.S. territories, which also included American Samoa, the Northern Mariana Islands, Puerto Rico and the U.S. Virgin Islands.

The defense spending on Guam comprised 28.4 percent of the island's gross domestic product, the highest of any U.S. state or territory, according to the report released in January.

"In order to rebuild a stronger, more prosperous Guam, we need to ensure our government processes are efficient and effective," Muña Barnes said. "For too long, the government of Guam has lost millions of dollars in uncollected taxes on military contracts - millions of dollars that could have gone to provide critic