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Senators: Pay company to finally collect cigarette taxes

By Nancy I. Maanao

Speaker Tina Muna Barnes and Sen. Jose "Pedo" Terlaje introduced legislation that will award up to 12 percent of the tobacco taxes that a company can collect on behalf of the government of Guam.

The company would be regulated by the Department of Revenue and Taxation to ensure the application of the cigarette stamp on all packs of cigarettes entering Guam, and the payment of taxes on those cigarettes sold at retail.

Public audits have revealed that cigarette wholesale companies and distributors have been skating on tens of millions of dollars in tax payments because the governor has not implemented the tax stamp mandate, or Public Law 34-55, which was authored by then-Sen. Michael San Nicolas.

Mr. San Nicolas wrote the law because of reports that at least one company, Calvo-owned MidPac, had failed to pay tens of millions of dollars in cigarette taxes during the administration of then-Gov. Eddie Calvo.

Then-gubernatorial candidate Lou Leon Guerrero promised to collect on these past-due taxes as part of her promise not to increase taxes and to roll back the business privilege tax increase.

Now-Congressman San Nicolas introduced House Resolution 4635 in October last year following inaction by Gov. Lou Leon Guerrero to collect on the Calvo tax debt and to implement the local tax stamp mandate. The federal legislation will federalize the enforcement of cigarette business following the local government's failure to do anything about the local problem.

Mr. San Nicolas's measure follows Ms. Leon Guerrero's inability to collect at least $14.3 million owed by Calvo-owned MidPac distributors. The company received a tax settlement from an exponential tax payable during the Calvo administration. Ms. Leon Guerrero has chosen to go after much smaller businesses and citizens while neglecting to collect on this huge receivable and while giving tax settlements to at least two wealthy businessmen connected to her Administration. Meanwhile, the governor has refused to support the ending of the 25 percent business privilege tax that hurts the poor and working classes most. She said she wants the increase to remain "forever."

The bill by Ms. Muna Barnes and Mr. Terlaje will require the Department of Revenue and Taxation to issue a request for proposals for a company to run the tax stamp and collections program for the government. According to the bill, DRT will be required to issue that RFP within 45 days of the bill becoming law.

The bill is nearly identical to one introduced by Mr. San Nicolas in the last legislature to force Mr. Calvo's hand. The major difference is that Mr. San Nicolas's version would have awarded 40 percent of tax proceeds collected to the outsourced company.

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5% business privilege tax, not 25%.

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