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Finance Minister Gives Parliament Answers on TAXAND Contract and COLA Payments --- Procedures were not Followed --- Tuitt.

financeministeranswersquestionsposedbyparliament11062012Philipsburg:--- Minister of Finance Roland Tuitt presented Parliament with the answers to the questions they posed to him last week during a Central Committee meeting on Monday.
Minister Tuitt insisted that basic procedures were not followed when his predecessor Minister Hiro Shigemoto negotiated with the TAXAND group. Tuitt said because procedures were not followed he is currently reviewing the entire process and an audit is being conducted on it.
Tuitt said the former Finance Minister did not even have a signed contract that was approved by the Governor of St. Maarten. He also confirmed to Parliament that the TAXAND group belongs to Mrs. Judith Brewster, who was contracted by the former Minister of Finance in late 2010 to provide fiscal advisory services to the former Finance Minister. Mrs. Judith Brewster is the sister of Mrs. Ruth Boyrard-Brewster, a policy advisor in the staff Bureau of the Ministry of Finance.
The Finance Minister also confirmed to Parliament on Monday that some invoices that were submitted by TAXAND were paid. He said TAXAND was paid a total of $ 2,655,678.02 (NAF. 4,727,106.89). While the invoices that were submitted in March were put on hold by him and Government now owes TAXAND $ 3,058,031.27 (NAF. 5,504,456.30).
Minister Tuitt also provided the Chair of Parliament with copies of the TAXAND contract and advices that were approved by his predecessor and the Council of Ministers on March 22, 2012 which are to be distributed to the Parliamentarians.
Minister Tuitt said the former Minister of Finance placed TAXAND services on hold when the Governor did not sign the decree. The draft decree he said was sent back to his office by the Governor for handling.
Minister Tuitt further explained to Parliament that he sent an email to the TAXAND group requesting that all remaining activities related to the tax compliance project be placed on hold until further notice. The Finance Minister said when he is finished studying the legal advice he received with regards to the TAXAND contract then he will decide how to proceed with the handling of TAXAND.
Tuitt said based on the contract Shigemoto has with TAXAND there is no fixed amount on the cost. The project he said will cost 11 million dollars excluding the out of pocket expenses and the 15% capped success fee which could be as much as 20 million United States Dollars while the services of TAXAND will be indefinite unless termination by the SOW.
Minister Tuitt also explained that there is a potential risk that a deficit could be caused by the shortfall of the income tax and the payment of the COLA which he said can be mitigated.
Tuitt said based on the unaudited reports during the first four months of 2012, revenues were about NAF. 19 million higher than projected compared to the trend of 2011. These realized figures, combined with the liquidity prognosis create room to increase the budget for 2012 at about 7 million.
The first three months of 2012 showed an overall under-spending of about NAF. 13 million, while a substantial part of the COLA, namely the back service (NAF. 11 million), is an administrative amount which was already reserved and booked in the 2010 annual account. Because of this, Tuitt said there will be no real burden on the operational accounts of 2012. He also explained that the 2012 budget has one million guilders for vacancies that are not yet filled and these monies could mitigate the COLA and other expenses. The Ministry of Finance said the budget amendments for the COLA payments would keep the budget balanced as required by the Kingdom Legislations. Tuitt said the intention of his predecessor was to pay the COLA from the reserves, but this is not needed based on the liquidity projections of government. In accounting, it is not good practice to use reserves to finance structural costs. Furthermore, this principle decision was not approved by Parliament, as it was not reflected in the budget for 2012. The budget amendment which will be presented to Parliament will include provisions for payment of the COLA without using the reserves. Tuitt also confirmed that the COLA payment has to be made because of an agreement that was made between government and the unions.
Regarding the condominium tax which the former Minister estimated to be NAF. 22 million, the Minister said is a plan of approach which was made up by the CFT and execution started however during the execution of the collection process it became clear that the target of NAF. 22 million would not be met.
Minister Tuitt said the CFT already indicated that the NAF. 22 million was not collectable therefore in its letter of April 20, 2012 the CFT expressed doubts about Government's ability to collect that amount based on the collection efforts to date.
He said his predecessor did not take any measures neither did he leave anything behind to plug the gap of the NAF. 22 million he envisioned in condominium tax. Tuitt said that the first quarter report shows that there will be additional revenues in certain areas of tax collection, combined with the under spending. This he said should be sufficient to keep the budget balanced. He also insisted that his Ministry is still processing data in order to determine if additional action is required.
The previous Minister of Finance indicated that the reserves could be used to pay for the COLA expenses. The CFT has indicated that this could not be done as long as the annual accounts had not been approved. The annual account 2010 has recently been handled by the SOAB, Tuitt said. He further explained that the period during which Sint Maarten was an island territory, this annual account covers the period up until 09-10-2012. It will be presented to the Parliament as soon as possible. The period from 10-10-2010 through 31-12-2011 will be included in an annual account with an extended book year, which should be finalized soon.
The Finance Minister also told Parliament that the St. Maarten Senior Citizens Home and the Middle Region Community Council should receive Naf. 15,000.00 each.
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