GUAM TO WITHHOLD TAX REFUNDS

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Government seeks to avoid cash shortfall

By Oyaol Ngirairikl HAGATNA, Guam (Pacific Daily News, Jan. 13, 2011) – In Guam, there will be no tax refunds paid out, not even for emergency requests, until the new administration has determined where the local government stands financially.

Currently, it's standing deep in the red, according to the administration.

The government of Guam is looking at a cash shortfall of about US$116 million, and owes more than US$285 million in tax refunds, according to the Calvo administration.

The Department of Revenue and Taxation acting director has not paid any tax refunds since coming on board last week. Prior to his arrival, the previous administration had not paid refunds for about three weeks.

"I think toward the end of December, the last administration decided to stop for a while because of the cash flow situation, said acting Rev and Tax Director John Camacho. And right now, with this new administration, there's no green light to continue because of the cash flow. Since we've taken office, we've not run any refunds at all."

Senate Ben Pangelinan, who has championed the cause of paying income tax refunds to residents, said he's concerned at reports that refunds haven't been paid in four weeks.

"This is definitely not in compliance with the Fiscal Year 2011 Budget Act, he said. If the administration does not adhere to the Budget Act, then they are subjecting themselves to potential legal action by Guam taxpayers and me."

The senator noted the Legislature's Office of Finance and Budget is waiting for the most recent Department of Administration Reconciliation report to confirm the actual tax refunds paid against the Fiscal Year 2011 tax refund budget.

Figures as of Jan. 6, however, note that GovGuam collected US$121.4 million in the first quarter of fiscal 2011, October to December. That figure is US$1.8 million short of projections.

"The Legislature's intent in the annual Appropriations Act of 2011 is that income tax refunds are the No. 1 priority payment, he said. The provision for tax refunds is taken off the top of revenue projections and therefore not a discretionary payable of the government. Before we write a check for any government expenditure, we first write a refund check to the Guam taxpayer."

He added that payment of refunds should be commensurate with the level of revenue collections as a portion of the amount budgeted.

"For example, if 98.5 percent of revenues are collected then 98.5 percent of budget tax refunds should be paid," he said.

Rev and Tax's Camacho said the appropriated US$100 million for tax refunds for the current fiscal year is still bigger than what GovGuam can handle.

"The government would have had to pay about US$2 million each week in tax refunds every week for an entire fiscal year, he said. With our cash situation, that's impossible. That's the thing, you can make an appropriation, but that has to be supported with cash, which we don't have a lot of right now."

Last year, in October and November, there were millions in tax refunds paid out above the rate of the intended schedule.

Former Bureau of Budget and Management Research Director Bertha Duenas had said US$15.2 million was paid out in tax refunds, which was 42 percent more than what was budgeted for October and November, according to Pacific Daily News files.

"I believe it was a disbursement schedule oversight, but will be smoothed out for December; i.e. since payments are US$4.5 million over budgeted provisions for refunds in October and November, the December refunds will be adjusted down by the same amount," she had stated.

The former administration's spokesman, Shawn Gumataotao, had said the aggressive refund payouts resulted in more income for businesses and higher gross receipts taxes for GovGuam in December.

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