By Mar-Vic Cagurangan
The governor’s call for the expansion of tax relief for small enterprises “is a positive step” but not enough to lift the weight from the business sector in general, the Guam Chamber of Commerce said.
Besides business-friendly tax adjustments, the chamber said the government needs to practice fiscal prudence and find long-term solutions to boost economic resilience.
“A $1.4 billion budget is unsustainable,” the chamber said in a statement in response to the governor’s State of the Island address Wednesday.
“For too long, our local companies have borne the weight of our government’s taxation by tightening spending, forgoing much-needed repairs, facilities maintenance, and overall, have been doing more with less,” the business organization said.
While the private sector shoulders the burden, the chamber noted that the government of Guam “saw exorbitant pay increases” without a corresponding improvement in services.
“Our schools, public health, public transportation, and public safety services continue to cry out for more help and assistance,” the chamber said. “The government of Guam’s workforce grew, and local businesses stagnated and, in some cases, closed completely.”
During her speech before the legislature this week, Gov. Lou Leon Guerrero called on the senators to raise the threshold for reduced business privilege tax rate for small businesses under the Dave Santos Act.
From $500,000, the governor sought to raise the cap to $1 million for small businesses to qualify for a 3 percent BPT.
“The governor’s proposal to raise the business privilege tax cap to $1 million is a positive step. However, we believe that a broader review of the BPT structure is needed to ensure fairness and competitiveness,” the chamber said.
“While there are a number of small businesses that currently earn $500,000 or less annually and can take advantage of the 3 percent BPT, there are still more local businesses that do not qualify for the Dave J Santos Act and are major contributors to the local economy by providing jobs for our residents,” the business group said.
The government raised the BPT from 4 percent to 5 percent in 2018 as an interim solution to fill the revenue gaps created by the Tax Cuts and Jobs Act implemented during President Trump’s first term in office.
The 5 percent rate has since become a permanent policy.
“The government of Guam has reported millions in revenue surplus since it raised the BPT in 2018 from 4 percent to 5 percent,” the chamber said. “This additional 25 percent tax prevents companies from passing revenue back to their employees or investing back into their businesses.”
The governor said she refused to cut the BPT rate for large companies raking profits from the military buildup on Guam, arguing that “those who come here to profit from our growth must be willing to pay their fair share.”
"We agree with this statement and believe that fairness also extends to ensuring our local businesses do not carry a disproportionate amount of the tax burden," the chamber said.
However, the chamber said the governor has wrongly associated local businesses with off-shore contractors.
“Categorizing our companies in the same group as off-island contractors is a blow to local businesses that have been the backbone of our local economy for years,” the chamber said.
“ These same companies have held on to their businesses on a shoestring budget and deserve support from this government for diligently paying their taxes and barely getting by,” the chamber said.
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