What privilege? The business privilege tax and the closing of Guam’s doors

By SamuelS. Kim

 There is a word embedded in the very name of one of Guam’s most consequential taxes that deserves our honest attention: privilege.

The business privilege tax—originally the gross receipts tax before being renamed in 2007—carries the implicit assumption that operating a business on this island is a privilege worth taxing. Perhaps decades ago, when Guam rode a wave of booming Japanese tourism and steady military spending, that framing made sense.

But walk through Tumon today. Count the darkened storefronts. Talk to the restaurant owner working the register because she cannot find a line cook. Talk to the contractor turning down work because he cannot staff a crew. Then ask the question every business owner on this island already knows the answer to:

What privilege?

The Guam Chamber of Commerce has tracked at least 60 businesses that have shut down or significantly reduced operations since the pandemic. In May 2025, the chamber listed more than 25 closures—retail stores, salons, coffee shops and restaurants—many of them island fixtures. By August, the losses accelerated. Tony Roma’s closed after 40 years. Caronel Watch Center shuttered.

Then came the seismic announcements: DFS Galleria, an iconic anchor on Guam for nearly 55 years, announced it would close by March 2026. Hard Rock Café followed. Rolex began winding down.

These are not marginal businesses that misjudged their market. They are established, often globally backed enterprises that ran the numbers and concluded that Guam no longer works.

Meanwhile, new business license issuances have declined steadily—from 3,010 in fiscal year 2023 to 2,572 in FY2024, down to 2,440 in FY2025. Guam is not just losing businesses. It is losing the appetite to start them.

At the center of this unraveling sits a tax structure that punishes businesses not for succeeding, but simply for existing.

The BPT is a gross receipts tax—a critical distinction often lost in political debate. It is not levied on profits. It is levied on total revenue, every dollar that passes through a business’s hands, regardless of whether that dollar represents profit or loss.

Consider a restaurant that generates $500,000 in gross receipts but, after paying

for imported food, utilities, rent and staff, realizes $25,000 in profit. At 4.5 percent, that restaurant pays $22,500 in BPT—nearly its entire net profit—before income taxes even enter the picture.

And here is the detail most people miss: the BPT is not Guam’s version of an income tax. It is an additional tax layered on top of one. Under the territory’s “mirror code” system, businesses already pay a territorial income tax at federal rates—the same brackets, the same structure—to the Guam Department of Revenue and Taxation. The BPT sits on top of that. A business on Guam pays income tax on its profits and a gross receipts tax on its total revenue, whether it earned a profit or not.

The burden also cascades. The BPT applies at every stage of the supply chain—the distributor who imports goods pays BPT, the retailer pays again, and the consumer absorbs the compounded cost. On an island where nearly everything arrives by ship or air across thousands of miles of ocean, this cascading effect multiplies already elevated costs.

The Guam Chamber put it plainly: the 25 percent increase in the BPT rate from 4 to 5 percent in 2018 prevented companies from reinvesting in their businesses or passing revenue back to employees. That is not speculation. It is the lived experience of business owners who watched margins evaporate while being told the increase was temporary. It took seven years to begin rolling it back.

The BPT debate intersects with a crisis that should alarm every policymaker: businesses cannot find the people they need.

The tourism industry’s workforce has shrunk from 20,000 jobs before the pandemic to roughly 14,000—a 30 percent contraction in the sector that once accounted for 63 percent of private employment. The 2025 Top Companies in Micronesia survey found that approximately 65 percent of businesses reported labor shortages as a significant operational challenge, and only 14 percent reported improved bottom lines.

The problem is straightforward. When margins are compressed by high input costs and gross receipts taxation, businesses cannot offer competitive wages. When employees calculate that their skills command higher pay on the mainland, they leave. And when they leave, the businesses that remain do more with less—or close.

The chamber captured this dynamic precisely: local companies have been “tightening spending, forgoing much-needed repairs, facilities maintenance, and overall, have been doing more with less”—while government employment grew and government employees saw pay increases without corresponding improvements in public services.

While Guam layers a gross receipts tax on top of federal-rate income taxes, nine U.S. states—including Texas, Florida, and Tennessee—charge no state income tax at all. The results speak for themselves. Texas has attracted more than 200 major company relocations since 2020, adding over 103,000 jobs from business in-migration. The top three states on Chief Executive magazine’s 2025 “Best States for Business” list—Texas, Florida and Tennessee—all have no state income tax.

The principle is not complicated. Reduce the tax burden and more businesses come. More businesses mean more jobs. More jobs mean more workers, more residents and a broader tax base generating more total revenue—even at lower rates. This is economies of scale and it is the conversation that matters most.

Guam cannot eliminate its territorial income tax; it funds the government. But layering a gross receipts tax on top of it, while competitors eliminate theirs, defies economic gravity.

Moody’s described the recently enacted BPT rollback as “credit negative,” estimating it could cut approximately $80 million in annual revenues while Guam Memorial Hospital faces operating losses approaching $65 million per year. These are serious numbers.

But the government budget is not the economy. You cannot collect a 5 percent tax from a business that no longer exists. Guam’s general fund was $74 million ahead of budget through August 2025—even as businesses shuttered in record numbers. That surplus was driven by military buildup spending, not a thriving private sector. When the buildup peaks, what remains?

Based on testimony delivered to the Guam Legislature throughout 2025, the priorities are consistent: a tax structure that accounts for profitability rather than punishing gross revenue; streamlined permitting that reduces timelines from months to weeks; workforce development aligned with actual business needs; and an economic development posture that leverages Guam’s genuine advantages—duty-free access to the U.S. mainland, the American legal system, and a geographic position bridging Asia and America.

The proposed Guam Tariff Advantage Development Act, which would create tariff-advantage zones with workforce development requirements, represents exactly the kind of forward-thinking legislation that could diversify the economy. Existing tools, such as GEDA’s qualifying certificate program, which has catalyzed industry growth since 1965, should be expanded and modernized.

And the Dave Santos Act’s protections for small businesses—a 3 percent BPT rate for most and full exemptions for those earning under $50,000—must be preserved and strengthened. But even that protection has quietly eroded. The $50,000 full exemption threshold was set when the Act was enacted in 1997 and has never been adjusted for inflation.

According to BLS Consumer Price Index data, $50,000 in 1997 is equivalent to approximately $101,000 today—the threshold would need to have roughly doubled just to maintain the same real value. A micro-business earning $75,000 today would have been comfortably under the exemption in 1997 purchasing power. Now it pays BPT on every dollar.

There is a principle that guides how I try to live: we are called to be good stewards of what we have been given. Good stewardship does not mean preserving what exists. It means cultivating growth, so that what we have serves more people for generations to come.

When Tae Oh, outgoing Chamber chairman, reflected on the BPT rollback at his farewell address in November 2025, he did not speak in the language of politics: “This initiative was not about special interests. It was about fairness, sustainability, and the long-term health of Guam’s private sector.”

He is right. And the work is far from finished.

The privilege of doing business on Guam should not be taxed as though we are doing businesses a favor. It should be something we cultivate—with humility, with urgency and with the understanding that every closed storefront is a door that did not have to shut.

Samuel S. Kim is a senior technology leader with more than 20 years of experience spanning software engineering to executive oversight. He founded and scaled a 60-person R&D division in Seoul, achieving national recognition including a Presidential Award for Excellence in Workplace Culture (2022). He holds a BA in Economics from UCLA and currently resides on Guam with his family. He can be reached at sk102.co.