OPA profiles real property taxes, cites lost potential revenue - KUAM.com-KUAM News: On Air. Online. On Demand.

OPA profiles real property taxes, cites lost potential revenue

Posted: May 17, 2018 1:33 PM Updated:

Tens of millions of dollars of lost potential revenue - those are the findings of a five-year assessment of the Department of Revenue & Taxation's real property taxes and exemptions made by the Office of Public Accountability.

The performance audit examined the years 2012 to 2017, noting property value on Guam is up by nearly $60,000 - 43 percent from 2011. That means in 2016, the average assessed property value in Guam was more than $196,000.

However, Guam's effective tax rate of 0.17 percent, one of the lowest tax rates in the nation coupled with uncollected taxes resulted in the unrealized revenue. Guam's property tax revenues account for only 3.4 percent of all taxes, while according to the Tax Foundation, property taxes were the largest source of state and local tax collections in the U.S. at about 31 percent.

Uncollected or delinquent property taxes, unbilled properties, and even unbilled Chamorro Land Trust leased properties were among other culprits to more than $40 million in unrealized funds between 2012 and 2016.

The public auditor made several recommendations including correcting systems between Rev & Tax and the Department of Land Management as well as aggressively collecting and enforcing on delinquent property taxes.

Speaker BJ Cruz responded to the audit, “The OPA’s audit shows that government is failing at its most basic level. When the Legislature gives DRT staff the resources it needs to do the job and more than 40 of its vital positions remain vacant 9 months later, I’m beginning to think this kind of ineptitude is intentional.”

The administration responded, "The Department of Revenue and Taxation has played a key role in our island’s improved economic outlook and financial standing. In the last seven years the deficit has been reduced from nearly $400 million – we’re now anticipating less than $90 million deficit when the FY2017, more than $1.3 billion in tax refunds has been given to taxpayers, and the government’s annual revenues has nearly doubled to about $900 million. Much of this can be attributed to Department of Revenue and Taxation’s more aggressive collection efforts.

There are some clear misconceptions in the audit related to the Department of Revenue & Taxation Real Property Tax Assessment and Exemptions Audit.  Some of what the Public Auditor and senators have called lost revenue is actually legislatively mandated tax credits and exemptions.

In response to the audit, Rev & Tax officials noted (among other things):

• “… lost revenues of $40.1 million in real properties…”

• In fact … $23.1 million of the $40.1 million are tax exemptions and tax credits mandated by law. The remaining $18.8 million are still collectible and through programs like the tax amnesty, there is an opportunity to

This audit ignores issues such as bankruptcies, probate, or cases in litigation that may have prohibited prompt payment of taxes. Additionally, some of these tax cases take years to litigate.

• Comparing Guam and U.S. property tax collections

• Really, You can’t compare Guam property taxes to the United States of America. Guam doesn't have the same industrial make-up such car manufacturers, casinos, Silicon Valley - we're talking billion dollar industries. The largest industry on Guam would be the construction industry, which relies more on the local market's demand for homes than it receives requests to build resorts seen on the Las Vegas strip. The spectrum of industries aren't on the same scale. Additionally, if the Guam property tax rate was similar to the USA's 31.3% then no one could afford to live here.

• Statement: Lack of employees

• Fact: There was a hiring freeze due to the federal tax reduction and the cost-cutting measures.

Additionally, the Fiscal Strike Force, continues to work on areas where tax collections can be improved upon. The Fiscal Strike Team is tasked with examining key revenue streams such as Use Tax, Tobacco Tax, Air BNB, and Real Property Tax. ??The Fiscal Strike Force will include key cabinet members from departments such as the Department of Administration, Department of Rev & Tax, Bureau of Budget Management & Research, Office of Technology, and Guam Customs and Quarantine."

To read the full report, go to opaguam.org.

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