The Government of Guam's (GovGuam) Department of Revenue and Taxation (DRT) collects tax revenues, which account for more than half of GovGuam's revenue sources. The Business Privilege Tax (BPT), which applies to all persons or contractors on Guam as well contractors not located on the island but who conduct business on the island, made up 35 percent of Guam's tax revenue in fiscal year 2012. Any business that has contracts with the Federal Government, including the U.S. Department of Defense, for U.S. military projects on Guam is subject to the tax. With more than 6,000 U.S. Marines and their dependents relocating to the island, the number of contracts for projects may increase to build the infrastructure necessary to accommodate this increased U.S. military presence.
We evaluated DRT's ability to collect the BPT from Federal contractors. We found that DRT's procedure for identifying those contractors that are subject to the BPT and for collecting the taxes from those contractors to be incomplete. Because DRT does not have a complete policy for identifying Federal contractors who are subject to the BPT, GovGuam may not be collecting taxes that it is owed. In addition, DRT does not use a complete list of Federal contractors when identifying who is subject to the BPT, nor does it follow through with established processes, adding to GovGuam's problem of possible lost revenue. To provide programs and services to its people it is important for Guam to identify and collect all the taxes due. This evaluation report was delivered to the Honorable Eddie Baza Calvo, Governor of Guam.