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Minister Tuitt: St. Maarten’s financial outlook ‘not really gloomy’

FRIDAY, 23 NOVEMBER 2012

~ Considering increasing ToT on tobacco, alcohol ~

PHILIPSBURG–“It is not really gloomy, but it is not where we want it to be,” Finance Minister Roland Tuitt told Members of Parliament (MPs) on Thursday when he reported on the country’s financial state of affairs.

The minister also signalled government’s intention to increase the Turnover Tax (ToT) on tobacco products and alcohol as a means of raising more revenue and announced that government has earmarked some NAf. 1 million in the 2013 draft budget to cover school fees for primary schools pupils and that legislation to increase the old age pension to NAf. 1,000 is being worked on.

The ministry is still working on balancing the 2013 budget, which appears so tight at present that “little room” is left for new policies because of the debt matrix in which government must work.
As he has done in the past weeks, the minister pointed out that his ministry had been working diligently to fill the budget gaps where they exist, such as the NAf. 21 million gap created by the mostly uncollectable back taxes from foreign condo owners. He pointed out that this was a situation created by the former government.
So far, investments of NAf. 5 million each have been made in the Ministry of General Affairs and Finance, NAf. 1 million for Justice, NAf. 4 million in education, NAf. 50,000 in health care, etc., NAf. 131,000 in tourism and NAf. 17 million in infrastructure VROMI.

The increases in the ToT on tobacco and alcohol will not be a deterrent to the country’s sales of those products to tourists who stock up here by buying duty-free. Tuitt called them “pleasure items” for people that ultimately affect government, if measures are not taken. Alcohol and tobacco use leads to several health concerns and causes a drag on the health-care system.

MP Roy Marlin (Democratic Party (DP)) was not convinced about the increase of ToT on cigarettes and alcohol due to the accumulated effect of the tax.

MP Johan Leonard (United People’s (UP) party), while being against the use of tobacco and alcohol, said he didn’t think a tax increase would make sense from a health point of view, because people would still use it.
MP Dr. Lloyd Richardson is not in support of the sale and promotion of alcohol and tobacco. He said car-racing was more beneficial to the country and would be a booster for the low-season months as would a cricket ground.
MP Louie Laveist (National Alliance (NA)) asked how the increase or introduction of the ToT on the two items would impact the country’s duty-free status. “I think a tax on alcohol and tobacco will become a burden due to abuse/use,” he said.

The minister again voiced his view that the Dutch Government should not leave St. Maarten without social aid, when they are busy giving similar aid to other countries in the world. “Why give to the rest of the world and not your brother and sisters in the Dutch Caribbean?” he asked.

MP Gracita Arrindell (UP) recalled that she had warned about the supposed debt relief the Dutch Government had promised to give St. Maarten for a good starting point as a country. She suggested the government look into the Intellectual Property Bureau as a source of revenue and to get the Committee on the division of assets and liabilities of the Netherlands Antilles to complete its work soon.

The 2012 budget will require some amendments to bring it in line with the revenue collected and other changes. The numbers are showing that revenues stand at NAf. 320 million, while expenditures are at NAf. 326 million, leaving a shortfall of some NAf. 5 million to be covered at present. Some NAf. 32 million is on the capital accounts and government is working on acquiring a loan to carry out some much-needed work.

The several ministries have spent some 75 per cent of their budgets already.

Taking all the figures into consideration, receipts for 2012 have been better than 2011, although collections have “not reached where we want it to reach.”

To address increasing cost, Tuitt said a personnel stop may be required. This has already been suggested by the Committee for Financial Supervision CFT. Marlin called for government to clean up its apparatus and remove people who are not reporting to work and find work to keep others who are there with nothing to do. He said the Economic Affairs Department needs help, because business licences and other permits are still taking a year to process.

“We must look for additional revenues for 2013,” the minister told MPs. As he is not in favour of increasing taxes, other avenues for revenue are being explored such as dividend payment from the Central Bank of Curaçao and St. Maarten. The bank had generated some NAf. 26 million for licensing fees annually in the days of the Netherlands Antilles. Now, Curaçao and St. Maarten have claims on the fees. Based on calculation, the licensing fees could bring in an additional NAf. one million.

Stimulating the Bureau Telecommunication to generate more money, creating a dividend policy to get funds from government-owned companies and collecting a dividend from St. Maarten Telephone Group of Companies TelEm and United Telecommunication Services (UTS) were some other possibilities mentioned.

The airport doesn’t pay a dividend, but government has “to tread carefully,” because one clause in the airport loan agreement is that no dividend can be paid while the loan is running.

MP George Pantophlet (NA) said he believed the airport and harbour companies could pay more to government to help the financial situation.

Government is also trying to find a solution for the “new government administration building” on Pond Island; some NAf. 24 million is needed to cover the Build, Own, Operate and Transfer (BOOT) fees. Government Accountants Bureau SOAB has “unravelled that BOOT fee” and has suggested the interest paid needs to be taken out of the sum, instead of presented as part of the rental payment. Tuitt said the contract would have to be looked at very carefully to see what could be done. If government had to put the interest separate, this would further increase the growing debt.

With the debt growing and other issues arising, St. Maarten could be pushed into a state where, for example, if it seeks a loan of NAf. 42 million now, the country may not be able to borrow again for as long as the CFT exists.
The country’s liquidity position is “positive.”

Tuitt said he requested a meeting with Parliament to outline the state of affairs and because be wanted the country “to start the year on the right foot.”

MPs Jules James (UP), and George Pantophlet and Hyacinth Richardson of NA also posed questions to Tuitt about the financial situation and other related topics.

The Central Committee of Parliament meeting was paused until further notice to give Tuitt time to respond to the questions.

The meeting did have a hitch. President of Parliament MP Rodolphe Samuel (NA) had closed off the first round of meeting very swiftly after the minister made his presentation. When he paused to see which MP wanted to speak, no one was ready or willing so he closed the round. However, this was protested, especially by James. The end result is that the “second round” will be treated as the first round of debate.

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