GUAM MAY LOSE MILLIONS IN TAX REVENUES

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By Gaynor Dumat-ol Daleno

HAGÅTÑA, Guam (November 3, 2001 - Pacific Daily News)---A federal audit report states that the government of Guam lost tax revenues of at least $769,650 because of what the report calls ''unnecessarily generous tax benefits'' to hotel and other tourism industry businesses.

GovGuam also could lose future tax revenues totaling about $70.8 million for the same reason, according to the audit released yesterday and conducted by the U.S. Department of the Interior's Office of Inspector General.

That projection, however, was made before the Sept. 11 terrorist attacks drastically reduced tourism businesses' revenues.

One objective of the audit was to determine whether the Guam Economic Development Authority effectively administered the qualifying certificate program, which grants tax rebates and abatements to qualified businesses.

The program is intended to entice investments on and into Guam.

According to a Guam Economic Development Authority response, the audit did not substantiate how the $769,650 figure was determined.

GEDA stated that, while the audit report repeatedly points out that GovGuam lost tax revenues, the benefits to Guam's economy far exceed the amount of tax revenues that have been or will be rebated or abated.

GovGuam will forego about $137 million in tax revenues -- via rebates and abatements of corporate income tax and real property tax -- the agency stated. That projection covers hotel and other tourism industry qualifying certificates granted during the audit period, which was from fiscal years 1997 through 2000.

But GovGuam will receive about $665 million in revenues from portions of businesses' income taxes and such taxes as gross receipts, hotel occupancy, real property and dividend, according to the agency. GovGuam also will earn interest for six months on taxes withheld before rebates are issued.

The audit report also alleges that the Guam Economic Development Authority:

§ Improperly granted tax abatements of $459,777 to program beneficiaries that did not fully comply with the conditions of their qualifying certificates.

§ Used $220,000 in fees -- meant for monitoring compliance with the conditions of the qualifying certificates -- for other purposes.

§ Authorized program beneficiaries to receive additional tax benefits of at least $815,990 while concurrently allowing the beneficiaries to not meet their local hiring levels. Those beneficiaries were 371 employees short of the number of residents they were required to hire under the program.

§ Improperly abated more than $5 million in Gross Receipts Taxes and an undetermined amount of use taxes without verifying amounts or eligibility.

In addition, the report stated, legally mandated investments in Guam's economy totaling at least $2.3 million may not have taken place because the economic development agency did not include language in qualifying certificates requiring beneficiaries to reinvest tax benefits and, for those certificates that included reinvestment requirement, did not monitor the beneficiaries' compliance.

For additional reports from the Pacific Daily News, go to PACIFIC ISLANDS REPORT News/Information Links: Newspapers/Pacific Daily News (Guam).

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