A bill before the 28th Guam Legislature attempts to stop the government of Guam from assessing a wholesale gross receipts tax against GTA.

Sen. Larry F. Kasperbauer chairman of the Committee on Education and Community Development of the 28th Guam Legislature introduced the legislation. According to Edward G. Lee staff assistant and policy advisor for Kasperbauer Bill 11 would stop the compounding of fees passed on to the consumer. He said GTA passes on the 4% wholesale GRT to other telecommunications companies and that telecommunications companies in turn pass that tax on to their consumers along with the 4% GRT retail tax.

“Every time I buy from a competitor of GTA in my billing I am paying the tax twice. I am paying the tax that it is assessed to GTA on the wholesale end when they sold it to my carrier and I am paying the tax to my carrier when they sold it to me. All of those taxes are added in to the price of my sale. Which means that if my carrier has the same price as GTA my carrier makes a much smaller profit margin than GTA because there is no wholesale transaction when they sell it to an end user consumer ” Lee said.

Kasperbauer said the bill would help consumers by providing for a better competitive climate “The facts are that since GTA became private GTA came out with “all-you-can-eat” cellular… and everybody else [other telecommunications companies] had to lower their rates. They came out with $35-a-month Internet… everybody else had to lower their rates.” He said “All this would do would level the playing field with GTA.”

Mark W. Chamberlin president of GuamCell Communications said “The real winner is the consumer.” He said “The government was very careful not to tax gross receipts unless there was an end product. Otherwise you are double-taxing the consumer on the wholesale side and at the end product.”

According to Chamberlin the consumer benefits under the Bill 11 scenario. “The consumer is best served when there is competition and prices are lowered.”

Lee said Kasperbauer anticipated this situation would take place before the sale of GTA and introduced legislation in the 26th Guam Legislature. “The wholesale tax is assessed at GTA and this exemption is for GTA but all GTA’s competitors are backing it because they know what this would do to help them and their consumers.”

Doris F. Brooks public auditor said she is concerned about the erosion of the government of Guam’s financial resources through the continual introduction of GRT exemption legislation and would oppose any such legislation. Lee said Kasperbauer recognizes this concern. “There may be nine players out on the field now paying GRT but if they are no longer able to compete with GTA because of the wholesale GRT then there will be less companies paying GRT in the future. We have to look at the bigger picture — what is going on in the market. We’ve already seen a telecommunications company that provides Internet cell phone service and long distance — EC Comm — sell its assets to another company.” He said “When we are talking about a profit margin of about 4% to 10% we cannot look at this as a loss of income on the wholesale level but preservation of GRT taxes on the retail level.”

Chamberlin said “When you have more business more GRT is paid to the government of Guam.”

The senator said he recognizes the importance of the Internet for school children and is concerned about the future availability of multiple providers and carriers. According to Lee the price of tangible goods were much higher when wholesalers were assessed a wholesale tax. He said there is an attempt in the U.S. Congress to loosen the regulations on phone companies with “lines in the ground” to be able to compete with emerging technologies “and just that means that competitors that rely on big companies like GTA are going to need every little competitive advantage they can get.”

Bob Taylor president and CEO of GTA said “The beneficiaries of this bill are the other telecommunications companies on Guam not GTA.” He added “This bill only impacts GTA in that it impacts our customers. We support the bill.” MBJ