St. Maarten – Outgoing Finance Minister Hiro Shigemoto leaves a 2012 budget behind with a deficit that could be as high as 39 million guilders ($21.66 million). This appears from two letters from the board for financial supervision Cft.
The 2012 budget projects 21 million guilders in revenue from tax on rental income from foreign real estate owners, but so far the tax inspectorate has issued just 11 realistic tax assessments for a total of 23,621 guilders ($13,123). “That is about zero percent of the amount it should have been based on the number of tax returns that were sent out,” Cft-secretary Cees van Nieuwamerongen wrote in a letter dated April 20.
To collect the 21 million guilders in taxes this year, the tax inspectorate targeted 500 foreigners. During a meeting of the Cft with the Taskforce Financial Management on April 10, it appeared that of these 500 real estate owners, 402 had been traced and registered as taxpayers.
The group of 402 was showered with 1,777 tax return forms for the past five years – 71 percent of the total that had to be sent out. The Cft notes that of these 1,777 tax returns, 630 were returned and they were all so-called zero-returns, meaning that these taxpayers filled out their returns in such a way that they owe the tax office nothing.
The tax inspectorate then sent out 132 assessments. Of those, the Cft says in its letter, only 11 are realistic. The blistering conclusion the Cft arrived at was this: “Of the target group of 500 people 80 percent received tax returns and up to now this has yielded almost zero percent of the target amount in realistic assessments.”
The Cft urges St. Maarten in the letter to present a budget amendment as soon as possible. St. Maarten should have informed the Cft by May 4 the latest about the way it intends to balance the 2012 budget and within which term the budget amendment will be realized.
In the same letter, the Cft notes that St. Maarten has abided by the instruction to limit monthly expenditures to 1/12 of the 421 million guilders budget, of 35 million guilders per month.
Last week, on May 9, the Cft sent another letter to Prime Minister Wescot-Williams and Parliament President Gracita Arrindell. In it, the financial supervisor establishes that St. Maarten did not react to its request to present a budget amendment within fourteen days. By doing so, the government violated the Kingdom Law that regulates financial supervision.
But there was more bad news: the Cft wrote that St. Maarten announced plans to pay civil servants 17 million guilders in cost of living adjustment, after it had received the April 20-letter.
“These additional expenditures were supposedly reserved in earlier years; they ought to appear as provisions in the annual accounts,” the Cft wrote.
But so far, the Cft only received a draft annual account for the period up to October 9, 2010. The deadline for submitting this account is long overdue. The annual account for the prolonged book year 2010 (from October 10) /2011 has to be submitted to the Cft by August 31 of this year.
“As long as the Cft does not have these annual accounts at its disposal it cannot make a statement about the adequate cover for these additional expenditures.” If the 17 million in cost of living adjustment has to come out of the 2012 budget, a budget-neutral amendment is necessary, the Cft indicated.
In its April 20-letter the Cft also took notice of the motion the parliament passed to take forego the collection of succession taxes; this revenue was projected to be 1 million guilders in 2012. “If this motion is executed, it will have to be part of the budget amendment.
The Cft has asked Prime Minister Wescot-Williams and Parliament President Arrindell to react to its May 9 letter within 14 days; the deadline for a reaction is therefore May 23 – next week Wednesday. By that day, the Cft expects a proposal to amend the 2012 budget in such a way that it is again in line with article 15 of the Kingdom law that stipulates that the budget must be balanced.
In the meantime, the deadline for the government to submit its first progress report to the Cft for 2012 has passed yesterday. That report should have addressed issues like the strengthening of the tax inspectorate, the 5-year plan Pefa (public expenditure and financial accountability), the long term financial development for old age pensions and social funds, as well as an analysis of the annual accounts 2009 and 2010 and their effect on the 2012 budget.