Small businesses do need the GRT reduced for survival

REOPENED: Renae Leon Guerrero prepares Fashion Design, a mobile phone accessory shop, for opening on May 17 at the Agana Shopping Center Market Place. The ASC closed on March 19 due to the COVID-19 pandemic, and reopened on May 11. Norman M. Taruc/The Guam Daily Post

A Guam bankruptcy attorney, Gary Gumataotao, gave a somber opinion in a story in The Guam Daily Post on Tuesday, that small businesses struggling to make ends meet and pay their debts – after nearly three months of little to zero revenue – could simply close up shop.

Many of our small businesses that have been crushed by the COVID-19 economic downturn won't even have the resources or energy left to go to the federal bankruptcy court to seek protection from creditors as they struggle to survive, according to Gumataotao's view.

In this environment, the bankruptcy attorney contends, it may just be a matter of time before small businesses and consumers run out of cash. That is, if they haven't already reached the edge of that financial cliff.

"One would expect the (business bankruptcy) petitions to increase due to this pandemic, but many owners will simply close shop and walk away," Gumataotao said.

In spite of the odds that are stacked against small businesses, particularly the ones who haven't received the federal loan programs or grants, some are trying. Many Guam restaurants have rearranged their seating and removed some tables to comply with the 50% occupancy rule that the local government's social distancing policy requires them to follow.

They're making this sacrifice, which could equate to a 50% reduction in customer traffic, just so they're allowed to reopen and make a little bit of cash for hoped-for – but not guaranteed – survival. For now, they're waiting for the local government's green light.

As time continues to pass by, with little cash flow coming in, the restaurateurs on Guam and other small businesses that are now seeing fewer customer traffic and reduced income are counting on the government of Guam to give a little.

And one of the more immediate forms of assistance GovGuam can give is a reduction in the gross receipts tax, some of the island's small businesses have said over and over again. GovGuam should share the pain small businesses are going through by reducing the GRT – even for a brief period of a year or two.

The local government hasn't been receptive to calls for a reduced GRT. The GRT is one of two main local sources of funding for payroll as well as for payments to the government's debts to bond creditors.

GovGuam should revisit the GRT issue as one way to help save local businesses and the private sector jobs they're trying to sustain. At some point, if GovGuam will be unwilling to give small businesses the support they're asking for, the local government will see its cash flow decrease over time anyway: The domino effect will also ripple through GovGuam when fewer jobs will be sustained and fewer employers can survive this pandemic.

In arguing against a GRT reduction, GovGuam will likely point out that, yes, it is trying to help small businesses, by offering federally funded small business grants through the Guam Economic Development Authority. The agency plans to release $1,000 to $30,000 in grants to each qualified small business that applies – depending on previously reported gross receipts tax. But the program will be capped at $20,000 because that's the money available from the federal government under the CARES Act.

For a small business, this grant will help for a brief period. But it's not going to be enough to keep their shops open in the longer term as more restrictions remain and as tourism will take months to start to recover.

What will it take for GovGuam to move on the GRT reduction? 


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