GUAM BUDGET PROPOSAL WOULD HIKE TAXES, FEES

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HAGATNA, Guam (Pacific Daily News, June 28) – The Guam’s new government fee increases and the proposed tax changes starting in October mean an extra cost of US$333 per year for every man, woman and child who calls the island home, according to a business lobbying coalition yesterday.

For an average-size family, the estimated impact is US$1,333 in extra cost every year, according to the Committee to Keep Guam Working, the umbrella organization for the five major business groups on island.

"The bottom line is it's going to affect (the cost of) every can of Spam, every sack of rice. Everybody's going to feel the brunt of this," said Clifford Guzman, the committee's executive director.

The proposed tax changes in the governor's revised spending proposal for fiscal 2008 go beyond affecting prices of everyday items at the grocery store.

The cost of car and home insurance, gasoline and banking services, as well as phone and Internet bills could go up under the administration's proposal to broaden the Gross Receipts Tax.

Guzman said the business community would like to work with local government officials on solutions beyond merely shifting the cost of government "on the backs of businesses and consumers."

"It is very difficult for our elected leaders because they are backed up against the wall -- and we understand that -- but when you are backed up against the wall that's when you need to stop, take a deep breath and think about it and use every resource that you can," Guzman said.

"The resources can be and should be the private industry. We can help with coming up with ideas," Guzman said.

The committee arrived at its estimated impact by adding up the cost of the new fees plus the proposed tax changes in the governor's updated spending plan for fiscal 2008, which starts in October.

'Fair share'

Under the governor's proposal, submitted Friday to the Legislature, the lifting of Gross Receipts Tax exemptions would increase the government's GRT collection to US$180.9 million in the coming fiscal year alone, up US$20 million.

Removing the GRT tax exemptions will make businesses pay their "fair share" of the tax base, according to the governor's letter to the Legislature on Friday.

The governor also wrote that his administration has done its part in reducing the cost of running the local government from US$512 million a few years ago to US$479 million now.

The committee involves the Guam Chamber of Commerce, Guam Hotel and Restaurant Association, Guam Contractors Association, The Employers Council and the Japan Guam Travel Association.

The five business groups provide jobs to 40,000 people, or more than double the size of the local government's voter base, according to the organization.

While the business community tries to drive the message home to consumers that businesses aren't the only ones adversely affected, lawmakers also can expect an increased volume of calls, e-mails and visits on the issue.

The Guam Chamber, which is the largest of the five business groups, is encouraging its members to write, call or visit lawmakers to let them know the local government's financial woes should not be fixed by collecting more taxes.

Senators are open to hearing the sentiment of the business community and their employees.

Republican Sen. Ray Tenorio attended the Chamber meeting yesterday and heard the business community's concerns.

"I think we need to be careful as policymakers because while our economy is looking at an upswing in the years to come -- we're not yet there," Tenorio said.

"I don't think our economy right now is poised to be able to sustain even a modest increase in taxes because we haven't yet started to come out of the woods -- economically speaking," Tenorio said.

"Until the money actually starts flowing to this economy and through your pocketbook and making our lives a little bit better, I don't know if imposing a higher tax rate for much of anything is going be palatable not only to Joe and Mary Cruz, but also to businesses A through X," Tenorio said.

Democratic Sen. Ben Pangelinan said the Legislature's Finance Committee should divide the upcoming public hearing on the fiscal 2008 budget into two hearings.

One will be for local government agencies and the other will allow members of the public to voice their views, Pangelinan said.

Hearing starts July 3

Vice Speaker Eddie Calvo's Committee on Finance, Taxation, Commerce and Economic Development will hold a public hearing on the proposed tax changes and the rest of the governor's budget proposal starting Tuesday.

Businessman James Adkins said the concept of GRT tax exemption for wholesalers and certain contractors was to cushion customers from higher costs when taxes add up.

In the construction of a home, for example, removing the GRT exemptions for architects and engineers, among others, is expected to drive up the cost of building homes and buying the finished product.

The government's plan to impose additional tax burdens on the business community, Adkins said, "is going to continue raising prices, which will spiral down the economy."

"It's going to hurt everyone, and I think the government should look very carefully at what they are doing," said Adkins, a member of the Guam Chamber.

"I think they should bring an economist on," he said, "and the economist should say what it's going to do to our economy."

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