By Gerardo R. Partido
Variety News Staff

DEMOCRATIC senators introduced legislation that would impose a moratorium on the Qualifying Certificate program administered by the Guam Economic Development and Commerce Authority.
Bill 62, sponsored by Sens. Ben Pangelinan, D-Barrigada, and Judith Guthertz, D-Mangilao, aims to suspend the issuance of new qualifying certificates, end the practice of renewing qualifying certificates soon to expire, and prohibit the modification of existing certificates.
Qualifying certificates are tax exemptions given to companies by the government of Guam. The Qualifying Certificate program provides the recipients with abatements and rebates on a variety of taxes such as income tax, property tax and the gross receipts tax.
According to a recent Department of the Interior study, these tax incentives create distortions in the economy and, by favoring certain activities over others, tax incentives inherently divert resources away from potentially more productive uses.
“I believe it’s imperative that we revisit the Qualifying Certificate program. It appears that the original intent to diversify our economic base and entice investors to take part in developing our economy in return for tax incentives has been abused. This abuse has translated into a loss of much needed revenue to our already financially ailing government,” Pangelinan said.
In addition to imposing a temporary moratorium, Bill 62 creates a Qualifying Certificate Assessment Workgroup composed of representatives from the government of Guam, the private sector, and the Guam Small Business Development Center.
The group will be tasked, among other things, with conducting a cost and benefits analysis on the effectiveness of the existing program, looking into the effectiveness of the monitoring and compliance system currently in place, and developing recommendations for the Legislature.
According to Guthertz, the Qualifying Certificate program needs to be reviewed because of the current financial crisis being experienced by the government.
“At this point, we need all the tax revenues we can get,” the senator said.
Pangelinan added that the goal of the legislation is to review the Qualifying Certificate program and see where improvements can be made.
“I don’t intend to suspend the issuance of qualifying certificates indefinitely. By establishing the workgroup, we can determine the optimal balance between the abatement and rebate of tax revenues and the long term economic benefits of such a program that encourages economic activity, without circumventing what it was originally intended for,” the senator said.
The bill will become effective immediately if enacted into law. Similarly, the moratorium will be lifted once the recommendations from the workgroup are adopted into law.
If no actions are taken to approve a new plan, the moratorium would automatically be lifted on the granting of new qualifying certificates.