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Opinion: Someone should be arrested for cigarette tax evasion; Republicans wrong for backing bill

By Sen. Jose "Pedo" Terlaje

Privatization and smaller government. Both of these ideals are Republican driven. I find myself at a loss for words as I watched the debate over Bill 104-36. Five republicans are united with two democrats for a bill that looks to undo P.L 35-129, which privatized the cigarette tax stamp affixation and monitoring and allowed any citizen to report any unstamped cigarette boxes to the Attorney General. It was only a few years ago that the Department of Revenue and Taxation cited a locally owned business and a local distributor of cigarettes, for not paying $14.5 million in cigarette taxes over a 3 year period. The company replied in local media that this non-payment was “inadvertent”. Their unpaid tax represented nearly 5 million packs of cigarettes sold over a three year period. How did they “inadvertently” not pay taxes on 5 million packs of cigarettes? And why has no one been arrested or charged with such a blatant and large act of tax evasion? How did this even happen under Revenue and Taxation’s watch? Let’s not forget that it was only a few years ago that nearly half of the Rev and Tax division in charge of monitoring cigarettes for taxes was arrested and convicted of public corruption, in an unrelated smuggling scheme. Senator Sabina Perez's Bill 104-36 proposes to put enforcement authority of cigarette taxes back to these same people, when no one has taken responsibility for “inadvertently” missing taxes on 5 million packs of cigarettes. I am at a loss to understand Senator Perez advocates for a return of responsibility of cigarette taxes to the same people who somehow inadvertently missed 5 million packs of cigarettes for taxation, without calling for an investigation as to how it happened and without calling for any consequences. I'm also curious why certain Republican Senators advocate for returning responsibility to the same people who let any company get away with not paying taxes on 5 million packs of cigarettes. For all the talk that certain Republicans in that group now make about transparency and fighting corruption in government, except when it comes to cigarette taxes. The private enforcement of tax stamps is not novel to Guam. In Hawaii, the tax stamp program has been run successfully for years by a private entity, namely First Hawaiian Bank. Public Law 35-129, which I co-sponsored, requires the Department of Revenue and Taxation to put out a bid for a private contract to manage a tobacco tax stamp program so GovGuam can effectively collect the tobacco sin taxes that our residents already pay on every tobacco product. This law, originally proposed by then-Senator Michael San Nicolas, is what Senator Sabina Perez and the Calvo Republicans are looking to undo with Bill 104-36, all this while the Public Auditor estimates that we lose out on $10 to $15 million in unpaid cigarette taxes every year. Congressman San Nicolas felt so strongly against Bill 104-36 that he took the time to testify against it in the public hearing. A private company would be motivated to ensure every single tobacco product was stamped because they only get paid for items they stamp beyond the average of what Rev and Tax has been collecting the past three fiscal years. It is simply pay for performance, if their process does not collect more money for Guam they are not paid. They only collect a percentage of what additional taxes they are able to collect, a structure similar to a collection agency. Insanity is defined as doing the same thing over and over again and expecting a different result. DRT "inadvertently" missed collecting taxes on 5 million packs of cigarettes in just a three year time period, and just isn’t equipped to start this program. I expect once a vendor is chosen DRT staff will be required to be present when tax stamps are sold, and will be forced to work with a private enforcer to develop a system that is effective, consistent, “fool-proof” and “corruption-proof”. Bill 104-35 is not the answer to more effective collections, a free market and private competent enforcement is.

Jose "Pedo" Terlaje is a Democrat member of the 36th Guam Legislature, and a resident of Yona.

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