Cruz Bills Propose to Close Tax Clearance Loopholes for Island Professionals

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Guam – Senator B.J. Cruz is has introduced 2 new measures that would require tax clearances for island professionals who seek to become candidates for election or want to be appointed to public office.

The proposals would cover licensed professionals  like doctors, attorneys, accountants, professional engineers, architects, and land surveyors.

READ Bill #260 HERE

Bill # 260 would add a new subsection to the Public Official Disclosure Act requiring the inclusion of a tax clearances with the reports public officials are already required to file with the Guam Election Commission.

READ Bill #261 HERE  

Bill #261  adds a section to the current finance and taxation law requiring tax clearances for the issuance of any professional licenses. 

The Senator is quoted in a release as saying that “Public officials who fail to pay their taxes shouldn’t be public officials … but until the Organic Act is amended, all our laws can do is let the light in and trust that our people can judge for themselves.”  

Senator Cruz said that DRT director John P. Camacho was able to provide the names of autonomous licensing boards and an agency whose licensing requirements do not require tax clearances [see below], but Camacho “could not even begin to account for the total tax revenue lost from those who have been granted such license”,  says the Senator in his release.   

READ DRT Director Camacho’s response to Senator Cruz HERE

The Senator also points out  that members of the Guam Bar Association overwhelming rejected any requirement to provide tax clearances for license renewals. And as a result Guam Supreme Court Chief Justice Phil Carbullido declined to adopt the proposal to require tax clearances for license renewals for attorneys.

READ Chief Justice Carbullido’s response to Senator Cruz HERE

In reaction to that decision by Justice Carbullido, the Senator writes that “while many professional licensing boards already require tax clearances through rule, regulation, or policy; I’m embarrassed to admit that attorneys have refused to regulate themselves in this area without the force of law”.

READ Senator Cruz’s letter to Attorney General Rapadas HERE  

The Senator has also written a letter to Attorney General Lenny Rapadas blasting him for failing to support the proposed tax clearance requirements. Cruz calls the “opposition to tax clearances a professional and moral failure”.

READ the release from Senator Cruz below:

Cruz’s Bills Propose to Close Tax Clearance Loopholes

(January 16, 2014 – Hagåtña) Continuing his longstanding efforts in addressing the need for greater transparency and increased public scrutiny of tax practices in both the public and private sectors, Vice Speaker Benjamin J.F. Cruz has introduced two sets of legislation that require tax clearances for candidates and appointments for public office, and for the professional licensure of doctors, attorneys, accountants, professional engineers, architects, and land surveyors.

Bill No. 260-32 (COR), which adds a new subsection to the Public Official Disclosure Act, mandates the inclusion of a tax clearance within the reports statutorily filed by public officials with the Guam Election Commission.  The new measure will affect the financial disclosure requirements of both elected officials and executive appointees who are subject to legislative confirmation, chief executive officers of all government agencies and instrumentalities, and individuals with the sole authority to enter into contracts.

 “Public officials who fail to pay their taxes shouldn’t be public officials,” Cruz said, “but until the Organic Act is amended, all our laws can do is let the light in and trust that our people can judge for themselves.

In 2011, Cruz introduced Bill No. 31-31 (COR) to require tax clearances for candidates for any elected public office, board or commission; the legislation was eventually tabled on the grounds that requirements for public office, along with other provisions in the Organic Act, may only be changed by an act of Congress.

Bill No. 261-32 (COR), which adds a section to current finance and taxation law, requires tax clearances for the issuance of professional licenses.  Granted by the director of the Department of Revenue and Taxation (DRT), the tax clearance shall indicate the filing status of returns for income tax, business privilege tax, and withholding tax; and the state of the settlement of any taxes that are due.

This bill I introduced (Bill No. 261-32) is an attempt at holding all professionals to a clear, consistent and codified standard,” said Cruz, who was compelled to take action after receiving information in October regarding inadequate professional licensing requirements.  He called on DRT soon after to provide him with a list of all professions for which licenses are required but tax clearances are not, and an estimate of the total revenue lost due to nonpayment or evasion of the Business Privilege Tax (BPT).

DRT director John P. Camacho, in his response on November 5, 2013, was able to provide the names of autonomous licensing boards and an agency whose licensing requirements do not require tax clearances (see Table 1), but could not even begin to account for the total tax revenue lost from those who have been granted such license.

While many professional licensing boards already require tax clearances through rule, regulation, or policy; I’m embarrassed to admit that attorneys have refused to regulate themselves in this area without the force of law,” said Cruz, referring to the Supreme Court of Guam‘s decision to reject a proposal to require tax clearances for license renewals for attorneys.

In a letter to the members of the Guam Board Association (GBA) on January 3, 2014, the Court stated that the decision was based on feedback from GBA members that was “overwhelmingly against requiring such declaration”, Cruz’s criticism that the declaration requirement inadequately addresses concerns, and the Code of Professional Responsibility that already “requires attorneys to conduct themselves ethically and in conformance with the law.”

The Court has a moral obligation to ensure that its officers act ethically and pay their taxes,” Cruz said.  “It is sad that they are comfortable outsourcing that responsibility to DRT alone.

Cruz stressed that other professions may be added to Bill 261-32 (COR) after the Committee on Aviation, Ground Transportation, Regulatory Concerns, and Future Generations publicly hears both measures in February.