Tax breaks for new investors:

I recently read an interesting article in another daily paper titled “Outrigger applies for tax breaks after board OKs Imperial Suites.”

To summarize the article, The Guam Economic Development Authority will review an application that would grant significant tax breaks to the owners of the Outrigger Guam Resort. The tax breaks include a 75 percent rebate of corporate income tax for 20 years, a 75 percent rebate on dividend tax for 5 years, and a 100 percent waiver on their property tax for 10 years. These tax breaks are significant but are intended to be incentives to promote on-island investment.

People may wonder how can the government of Guam afford to give tax breaks during the current economic downturn. It is simple; there is a much greater benefit from what I like to call the “trickle effect” from the project. The amount of taxes the government will earn from room taxes, employee income taxes, gross revenue tax, taxes on suppliers, income taxes on suppliers employees, etc. will far outweigh the “tax breaks” they give the hotel. This is a basic but very intelligent move by the government of Guam to help spur their economy.

Do we have something like this in the CNMI? I don’t think so. In fact, what we have is just the opposite. Instead of lowering taxes to help spur our economy, our government tries to find ways to extract the maximum amount of money out of developers and investors (both local and foreign). Why is our government so incapable of seeing the benefits of this type of policy? The CNMI government gives little or no credit or incentives for developers to come in and help restart our economy. Is there no real interest or is the task an insurmountable one for the CNMI to address?

The same newspaper article reported that among the conditions for approval is”…the company must landscape the triangle park located on San Ramon Hill in Hagatna and provide support to the tourism program at John F. Kennedy High School.” This; is nothing more than a little bit of icing on the cake for the developers. Of course the developer would be willing to do this and probably much more – as long as they can thrive as a business. As soon as they are strangled by excessive taxation they will go out of business and the community will lose all the benefits that are generated by the hotel.

It’s clear that the government does not always provide the solution to our problems. it’s also apparent that the government doesn’t have the financial means to provide or keep up with the CNMI’s infrastructure demands. For example., the Homestead areas have problems such as unpaved roads, inadequate or no water, no sewer, and improper drainage. I’m sure that some of this infrastructure could be put in place through a tax break law.

So I ask, why can’t we implement a program where everyone is a winner? We talk about how bad our economy is; shouldn’t we be talking instead of what we ought to be doing? We must not be afraid to take bold action. Let’s focus our energies to overcome the sluggish economy with laws and efforts that will truly give us positive results.

Efrain F. Camacho, P E.

President

EFC Engineers & Architects