A contentious debate is currently unfolding in Guam regarding a legislative proposal that seeks to exempt military contractors from a crucial business privilege tax rollback, igniting significant concerns among local business communities.
Former Guam Contractors Association chairman Joe Roberto has vocally expressed apprehension over this potential exemption, highlighting that many off-island businesses frequently rely on local enterprises for project execution, making the proposed tax policy a matter of economic fairness.
The focal point of this discussion is Senator Telo Taitague’s proposed amendment to Senator Shawn Gumataotao’s Bill 11-38. This amendment specifically targets federally funded military buildup projects, aiming to preserve the tax rollback for local businesses that are still striving to recover from the enduring economic impacts of the recent pandemic.
Guam is presently experiencing a significant surge in military construction, including large-scale endeavors such as the development of a 360-degree missile defense system. This backdrop amplifies the relevance and potential impact of tax policy decisions on both large military contractors and the island’s indigenous commercial sector.
Roberto passionately articulated that local small businesses and contractors in Guam secure a substantial portion of Department of Defense contracts, often up to 30%. He underscored that even when large off-island contractors undertake projects, they invariably collaborate with local firms, emphasizing that it is the local workforce that performs the physical labor on the ground.
Furthermore, Roberto contended that Taitague’s proposed amendment directly contravenes an existing local law, enacted in March 2011, which exempts subcontractors from paying Business Privilege Tax (BPT) or Gross Receipts Tax (GRT). He warned that the new amendment could lead to “double, triple, and quadruple taxation” across the supply chain, regardless of the percentage, due to its cumulative stacking effect.
Conversely, Roberto advocated for the full implementation of the tax rollback, arguing that such a measure would foster greater cash flow within the local economy, encourage more competitive pricing on contract bids, expand budget flexibility for businesses, and enable the provision of various employment incentives, ultimately stimulating economic development.
He also pointed out the inherent challenges Guam faces in accommodating massive projects, citing limitations in housing, infrastructure, and manpower. Roberto explained that while some billion-dollar contractors might hesitate to come to Guam due to these constraints, those who do arrive actively communicate and work with local contractors, who possess the necessary local presence and resources.
In a show of support for these concerns, Tae Oh, chairman of the Guam Chamber of Commerce board, affirmed his commitment to pushing for Bill 11-38 to be a key agenda item during the Legislature’s upcoming budget meeting, signaling a concerted effort from the local business community.
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