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CFT advises St. Maarten government to cut some NAf. 25 million from budget

FRIDAY, 25 JANUARY 2013

PHILIPSBURG–Government will have to find a way to cut some NAf. 25 million from the draft 2013 budget and find means to replenish the country’s reserves with NAf. 16 million, as money was used to cover some expenses. The Committee for Financial Supervision CFT has advised government that this is necessary to balance the budget. Government has asked for some two weeks to work this out.

The draft budget stands at some NAf. 476 million, compared to NAf. 432.5 million for 2012. CFT bases its suggested cuts on the actual realised income for 2012, which stands at about four per cent of the budget, and has coupled that with government’s plans to increase tax compliance this year. That brings the CFT to a percentage allowance of some eight per cent in estimated growth in income this year.

“We feel that a doubling of that increase, which is eight per cent, might still be called realistic. This is still difficult to reach in our view, because economic growth is only up one per cent. But we think this would be good governance. This would be responsible behaviour,” said CFT Chairman Age Bakker.

Bakker, along with the CFT board, was in a Central Committee Meeting of Parliament with which CFT is working to get the budget presented to parliament for approval together with a positive advice from the committee. CFT representatives also met with the Council of Ministers on Thursday.

Government cannot afford to take risks with the budget, because “the liquidity position is precarious, so you cannot allow any mishaps,” Bakker said. That precarious situation was caused by government using the reserves for capital expenses. Such use of the reserves is a short term measure, or “you will not have enough money in your coffers.”
Government needing to increase the budget by some 15 per cent “poses substantial challenges” for government, especially with the complexity of the high and low tourism season income. To get to the needed level, government has “a number of tax measures to improve tax collection in the draft budget. This will be an impressive package to increase the tax base of St. Maarten.”

The tax base continues to be “too low.” There is a need for it in order to provide services the population can expect, he added. “We have to realise that the economy situation is not an easy one. … We have to be realistic.”

St. Maarten is expected to have one per cent growth this year, based on figures from the Central Bank of Curaçao and St. Maarten, which is “good” compared to regional levels. However, the CFT chairman advised government “to be more cautious” by getting expenditure in line with the lower projected income. If the year’s revenues turn out to be much more than budgeted, government can present a supplemental budget to reflect its realised income.

The budget must include all known expenses, Bakker said, to avoid “nasty surprises” later in the year. He used the example of the previous budgets not including the amounts for the Cost of Living Adjustments (COLA).

CFT has “excellent cooperation” with government and receives all requested information. Bakker said Finance Minister Roland Tuitt has done “a very good job” in gathering a picture of government’s obligations and expenditures in the budget. He said his comment about Tuitt was not a reproach to past ministers, but one that stems from the continued improvement of the country’s financial management and process since the implementation of CFT.

It would be a “great move forward” if parliament agrees on a stable current budget that will enable the country to come up with capital investment at a very low interest rate, Bakker said.

Members of Parliament voiced their concerns about the lateness of government in tabling the budget for approval and lamented the trying economic times that continue to plague St. Maarten and the rest of the world. They also had issues with companies not paying taxes.

In that same vein, Bakker urged parents to teach their children that it is “not a shame to pay taxes.”
Democratic Party (DP) MP Roy Marlin was particularly outspoken about the budget, saying that parliament and government need to work at getting the issues solved, or within half a year CFT would be back in parliament, raising the same issues about having a balanced budget.

“Something is fundamentally wrong” when government’s projection for revenue collection is off and this situation needs to be resolved. Increase in taxes would create additional revenues, but there comes a point when we can’t pull blood out of stone.”

Marlin decried that fact that there was still no dividend or investment policy for government-owned companies. Without those there is no way for MPs or the people to know how money is being used and for what purpose, Marlin said.
As for government’s plan to write off back taxes up to 2006, the MP said this is good for the businesses that are registered, but those that are not paying, such as charter boats and off shore activities, must be tackled. “Broadening the tax base is not as easy as 1, 2, 3 … I am not talking about no condo tax that will hurt the economy … go after the people who don’t pay … simple little things to balance the budget without putting burden on the people.”

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