Cut tourism and restaurant taxes for five years

The Democratic-controlled Thirty-seventh Guam Legislature failed to even acknowledge that Guam’s decades-old number one economic engine, tourism, no longer is roaring. It’s more like a tricycle with a pedal missing. And Democrat lame-duck Governor Lou Leon Guerrero, despite her excellent handling of the pandemic response, will be remembered for tourism dying under her watch if the next two years solidify the ongoing dismal reset of the tourism economy. (Not to mention that if federal corruption indictments happen, her legacy will be toast).

The incoming Republican majority of the Thirty-eighth Guam Legislature has a golden opportunity to save the day. Throughout the general election season, Kandit interviewed most of the Republican candidates who will be senators in January. All of them committed to doing what the Democrats didn’t: prioritizing the resurgence of tourism.

But how?

I have two ideas.

First, the Republicans can pass one of two measures. Either a complete moratorium on the 11 percent Hotel Occupancy Tax, or a moratorium on the portion of the HOT that is not pledged to the HOT bonds issued during the Calvo administration.

Second, the new legislature should create a temporary qualifying certificate that provides an abatement of all business privilege and income taxes for every restaurant, canteen, and food truck business in Guam.

5-year elimination of the Hotel Occupancy Tax

If you read the online comments by Japanese and Korean visitors to Guam about their experiences here, you’ll notice two main themes: Our hotel room rates are too expensive, and many hotel rooms are dirty, outdated, and not worth the money they paid.

I have to imagine that hoteliers don’t want their hotels to dilapidate. They must want to renovate, disinfect, and make other improvements. But without tourism revenue, they simply don’t have the money to make these critical investments, much less to lower room rates.

Why not remove the burden of the 11 percent Hotel Occupancy Tax for the next five years so that hotels can have this breathing room?

What’s that you say? How will the Guam Visitors Bureau have money to afford its staffing and the cost of marketing Guam in Japan and Korea? Simple math: The new and hopefully courageous Republican majority can amend the budget by defunding $20 million (or whatever the staffing and marketing costs should be) elsewhere and appropriating General Fund revenues into the Tourist Attraction Fund for the next five years.

Why not? They said in their campaigns that tourism is a priority. Tourism, if you’re a thinking person, absolutely is the lifeblood of our economy.

A simpler and less courageous path would be to reduce the Hotel Occupancy Tax down to the annual pledged level for HOT bonds debt service. Not as reform-centric, but still lessens the burden on hotels.

 

5-year abatement of BPT and income taxes on restaurants

Similarly, if Guam’s new legislature is actually committed to the survival of tourism and the thousands of jobs that hang in the balance, then the new senators will have no problem using the General Fund to offset a loss in BPT and income taxes from restaurants that qualify for my proposed Restaurant Qualifying Certificate.

How it will work is that for the next five years, eligible restaurants (there shouldn’t be many qualifications) will continue to pay taxes as usual. The government, however, would be mandated to rebate those payments within 30 days of remittance.

Whatever that estimated annual cost in revenue would be, the legislature would appropriate that amount in the budget for the next five years from the General Fund. The budget process would be similar to how senators back out anticipated payments of tax refunds from the budget’s revenue section. This way, the government would not be abrogating GovGuam’s BPT bond covenants.

Imagine what Guam’s hotels and restaurants could do if they have the assurance by tax policy that they will be able to keep so much more of the money they make for a five year period. The Republicans wouldn’t simply be saving the jobs of tourism employees who would have been laid off because of the poor economy. They’d be providing these businesses with opportunities to finance improvements and perhaps hire more people and offer better wages.

The question is whether the new majority will have the intestinal fortitude to keep their promises about the importance of tourism. It’s a very simple question, though. Is tourism a priority, or not?

Let’s hope the Republicans put their money where their mouths are. I have faith in them.