Tax Policy and Administration:
The Government of Guam's Administration of Its Income Tax Program
GGD-80-3, Oct 3, 1979
The Government of Guam is losing millions of dollars because of its continuing problems in assessing and collecting the territorial income tax. Delinquent taxes amounted to over $15 million in 1978, or about 16 percent of total local revenues collected by Guam. The income tax is the major tax in Guam, providing 60 percent of its locally collected tax revenues. These revenues are supplemented by the transfer from the Federal treasury to the Guam treasury of Federal income taxes withheld from U.S. military and civilian personnel stationed in Guam. These transferred Federal income taxes amounted to $15 million in 1979, while locally collected Guam income taxes were $46 million.
Presently the Government of Guam lacks procedures for identifying individuals and businesses failing to file tax returns. Some employers failed to remit taxes withheld from employees. In addition, an unknown amount of taxes withheld from employees is being lost from businesses which do not file withholding tax returns. In spite of Federal assistance, which in fiscal year 1979 amounted to nearly 60 percent of its total revenues, the Government of Guam is having difficulties with cash flow problems. Changes need to be made, therefore, in the administration of the tax program. Three alternatives for administering the territorial income tax program are to: take no congressional action; provide funds for the technical assistance necessary to improve the present administration of the program; or require the Secretary of the Treasury to administer the program. It is hoped that congressional action will be taken, however, since the problems with the present system are very serious and the Governor of Guam has indicated that Federal technical assistance to administer the program would be appreciated. As for the second alternative, it is suggested that the provision of short-term assistance will not correct the existing problems, since the close family ties and extended family concept lead to favoritism and conflicts of interest which would continue to complicate collection of income taxes in Guam. Under the third alternative, the Internal Revenue Service has the capability to administer the Guam territorial income tax at an estimated cost of from $2 to $3 million per year.