Adelup anticipates tens of millions in losses - KUAM.com-KUAM News: On Air. Online. On Demand.

Adelup anticipates tens of millions in losses

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A major cash crunch looms for the Government of Guam. Federal tax reforms kick in next month, and the Calvo Administration is now weighing the likely loss of tens of millions of dollars in tax revenue. 

No one knows for sure yet how big of a bite the tax cuts will take out of the public sector's budget, but Governor Eddie Calvo has ordered his fiscal team and relevant agency directors to report back to him on the impact.  "Number one, look at the impacts fiscally in terms of revenues, number two prioritizing our major areas, obviously for me number one is public safety and health," said the island's chief executive.

The administration will need to figure out which  essential services to provide in the face of the anticipated deep cuts, with Calvo adding, "There have been estimates at anywhere between $40 million and $100 million. So, it's important to first of all get a clear estimate on what those cuts are going to be in terms of revenue, in this period where this transition occurs. And then with that we move forward."

Financial experts we spoke to in the past week are urging government officials to look first at trimming costs. But even they agree, there's probably no way around the need to increase tax revenue, with the governor saying, "I think as we sit down, we have to still look again at shoring up areas where we have gaps in critical services such as the hospital.

"And at the same time look at the reality of this new landscape with the tax reform act as initiated by federal law."

Some business leaders are pushing back on a proposal to raise gross receipts tax, and remove the GRT exemption from industries such as wholesalers.  Instead they are calling for replacing the business privilege tax with a sales tax. Calvo said, "It's a much more transparent tax methodology than a BPT, so I'm sure discussions will be made in that light as we start talking about the overall impacts of the tax reform act."

He says Speaker BJ Cruz is also looking into the financial impacts for the rest of the fiscal year. And will lead the annual review of the Fiscal Year 2019 budget, due from the administration by the end of the month.

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