By Jacob Nakamura
Republican Sen. Telo Taitague recently was castigated by GovGuam's chief procurement officer, Claudia Acfalle, for among other things suggesting public procurement be outsourced to a private contractor.
Yet, this same senator has been vehemently opposed to an existing law and process to outsource the stamping of cigarette packs so that GovGuam can collect tens of millions of dollars in taxes that currently aren't being paid.
A July 26, 2018 letter from then-Speaker Benjamin Cruz to U.S. Attorney Shawn Anderson states one cigarette distributor, MidPac, may be underreporting to the tune of $12 million annually in cigarette taxes that smokers pay, but the company allegedly keeps. And that's just one of the cigarette distributors.
"Mid Pac may control approximately 50% of the cigarette market on Guam, and based on the Department of Revenue & Taxation monthly reports, assuming other cigarette distributors are paying their portion of the cigarette tax, there is a potential underreporting of as much as 30% of the total cigarette taxes due in the range of $750,000 to $1,000,000 per month, possibly attributable to Mid Pac alone," Mr. Cruz wrote in his letter to Mr. Anderson as part of a request for the U.S. Attorney and the Federal Bureau of Investigation to investigate MidPac.
MidPac is owned by the Calvo family; and in 2018, a tax lien was publicly revealed showing Department of Revenue and Taxation negotiated a settlement for MidPac for failure to pay cigarette taxes between 2014 and 2017. Eddie Calvo was the governor through that entire time period, and by virtue of his position was in charge of tax collections. The tax settlement was for $14.7 million in unpaid and overdue taxes. Unconfirmed source reports placed the original figure at around $90 million.
Ms. Taitague has been at the forefront of the Calvo family-backed effort to squash the implementation of a law that will make it difficult for cigarette companies to evade taxes. After decades of failure by DRT to collect all of the cigarette taxes smokers have been paying to the distributors, the legislature through two laws (by Michael San Nicolas and Tina Muna Barnes, respectively) mandated the stamping of cigarette packs, and the outsourcing of that stamping to a private contractor.
The stamps provide a way for GovGuam to count the number of cigarettes that have been imported to Guam so that the proper tax of $4 per pack can be assessed, then collected. While it does not solve the problem of cigarette wholesalers stuffing containers with cigarettes and not declaring those items to customs upon import, this program at least will count the cigarettes that are reported, resulting in proper tax collection believed to be tens of millions of dollars more than the current rate. Last fiscal year, the Healthy Futures Fund, which is the fund where cigarette taxes go, received $43 million. These taxes primarily fund Guam Memorial Hospital and public health programs.
Ms. Taitague, on the one hand suggested the Guam Procurement Office be outsourced to a private contractor because of her accusation that Ms. Acfalle failed to send the senator a report. Ms. Acfalle quickly corrected the senator, telling her in no uncertain terms that while her job does not include serving senators on silver platters, the reports Taitague was demanding are provided timely. The senator simply didn't know this.
On the other hand, the evasion of multimillions brought about by the failure of DRT is backed by evidence and a barrage of audits and bona fide complaints to even the FBI, and Ms. Taitague opposes the outsourcing of the stamping process so that those taxes can be collected.
A recent filing in local court by attorney Joseph Razzano indicates MidPac and other cigarette distributors may not have paid cigarette taxes due in the first three months of 2021, unless revenue collection data for the government is wrong. Whether MidPac ever paid the $14.7 million owed for cigarette taxes due from 2014 to 2017 is unknown. The DRT has denied Kandit's request for documents to prove the taxes have been paid according to the secret settlement agreement during the Calvo administration.
It is no wonder KUAM's Chris Barnett has begun an assault on the effort to outsource the stamping process and finally collect the taxes. KUAM, too, is owned by the Calvos.
There is something rotten in Denmark, and it isn't the cheese.