Guam Tax Agency Opposes Hiring Private Company to Enforce Tobacco Taxes

The Department of Revenue and Taxation (DRT) of the US island territory of Guam in the Western Pacific, is opposing proposed legislation that would require it to hire a private company for the enforcement of tobacco taxes, as well as for the administration of a cigarette tax stamp programme that was supposed to be implemented in October 2018, but which is yet to see the light of day.

Among the DRT’s concerns with the legislation (which is in the form of Bill 368-35) is that it requires the hired company to be paid a fee that represents up to 12% of the tax collected each month on cigarettes, cigars and other tobacco products.

‘We estimate this to be $3 million to $4 million a year. This amount is monies that are diverted away from the Healthy Futures Fund,’ said Michele Santos, DRT Deputy Director.

Santos acknowledged, however, that the agency did need to improve its enforcement and administration processes.

‘It would seem that we have more work to do with respect to enforcement and administration. We offer to work with the attorney general to develop a request for proposal. At the very minimum, we would like to have a vendor to sell stamps, provide equipment and train wholesalers to use the equipment,’ Santos said, adding that ‘DRT is willing to do what it can to not pay the exorbitant fee of 12% of our revenues’.

Another concern is that the bill requires the hired company to draft any additional rules deemed necessary to enforce the tax stamp law, although a set of proposed rules are already included in the measure. According to Santos, a vendor should not be drafting rules and regulations for the enforcement of a tax for the government of Guam.

With regard to the reasons for the delayed implementation of the tax stamp programme, Santos advised that the DRT had previously submitted a list of critical items that needed to be addressed in order to move forward with its mandate, but had not received any feedback. ‘DRT never implemented the cigarette tax stamp because it was an unfunded mandate and we needed clarification from the attorney general that it was not a double taxation,’ she said.