By Mar-Vic Cagurangan
Cutting the business privilege tax from 5 percent to 4 percent will not make a dent in consumer prices, Gov. Lou Leon Guerrero said, kicking against a renewed Republican proposal for a BPT rate rollback.
The governor reiterated her longstanding argument that reducing the rate without identifying alternative revenue streams could jeopardize government programs and services.
Leon Guerrero issued the statement following the reemergence of the BPT rollback proposal in the 38th Guam Legislature.
Sen. Shawn Gumataotao, author of Bill 11-38, has noted that the BPT rate was raised in 2018 as an interim solution to alleviate the impact of the Tax Cuts and Jobs Act of 2017 on the local treasury.
The administration of then-Gov. Eddie Calvo estimated that the federal tax cuts resulted in a $67 million revenue shortfall.
What was initially designed as a stopgap measure has since been a mainstay in the government of Guam’s tax policy.
“I made a commitment during the 2024 campaign to work on restoring the 4 percent BPT and the bill that I introduced today is intended to help facilitate a much-needed conversation at the policy and implementation levels,” the first-term Republican senator said in an earlier statement.
The BPT rollback has been a recurring proposal— filed by different senators and persistently pushed by the Guam Chamber of Commerce— since its enactment in 2018.
When she assumed office in 2019, Leon Guerrero pressed on with her predecessor's BPT policy, claiming the impact of the federal Tax Cuts and Jobs Act of 2017 continued to affect GovGuam. During a media interview in 2019, she said she would prefer BPT to stay at the current rate “forever.”
Formerly known as “gross receipt tax,” BPT is the main source of government revenue.
“While I applaud Senator Gumataotao’s intent to address the high cost of living on Guam, historical data shows no reduction in the cost of goods following the legislature’s last rollback of the BPT,” the governor said.
She argued that when the BPT was slashed during the Camacho administration in 2004, the consumer price index went from an annual average CPI of 76.6 to 82.5, representing a 7.7 percent increase.
“This means prices actually went up, not down, after taxes were reduced,” the governor said. “This administration shares the goal of helping local businesses; that is why we lowered BPT for small businesses in our first term. Now, about 90 percent of Guam businesses pay a 3 percent BPT, and many pay no BPT at all.”
She noted that most businesses currently paying the 5 percent rate are large international enterprises locally involved in the military buildup, not small island businesses.
Leon Guerrero said small businesses on Guam are already getting tax relief under the Dave Santos Act, which provides a reduced BPT rate of 3 percent for most small businesses and full exemptions for businesses with annual revenues below $50,000.
"We must ensure that our community is not negatively impacted by the unintended consequences of a wider reduction. Losing this level of revenue would undermine our ability to provide healthcare, education, public safety, and other essential services," the governor said.
"We look forward to continued dialogue with Senator Gumataotao and our policymakers to find solutions that truly minimize the financial burdens on our residents without compromising critical services," the governor said.
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