Philipsburg:--- The Board of Financial supervision (College financieel toezicht - CFT) told reporters on Wednesday that they held meetings during the past two days with the Council of Ministers, Minister of Finance, and Parliament. The CFT concluded after their meetings that Sint Maarten faces challenges in improving the long term sustainability of its public finances and the quality of its financial management.
Financial management
Improvement of financial management must be the main priority of the government of Sint Maarten. The CFT applauds the effort of the government to develop a five-year plan to improve financial management. This plan will be presented to the Council of Ministers and Parliament by the end of July 2012. It is important that Government and Parliament embrace the five-year improvement plan and devote all resources to timely execution. This is the first time St. Maarten has developed a financial plan which will soon be presented to the Parliament of St. Maarten, CFT President Age Bakker told reporters.
An important element in improving financial management is to strengthen the functioning of the tax administration. The CFT urged the Government of Sint Maarten to finalize an action plan soon to achieve this. A broader tax base and an increase of tax compliance will enable the Government to provide an adequate level of public services.
Sustainable Public Finances
Sustainable public finances in the long term will require structural reforms in the areas of health care, social security, and old age pensions. The government of Sint Maarten agreed with the CFT to intensify its efforts to identify the financial impact of projected developments in social security funds and health care costs, with the purpose of including these effects in the next multi-annual budget. This was one of the conditions of the CFT for approving the budget 2012. The CFT urges government to initiate reforms in the pension system with the aim to put this on a sustainable footing. Although this problem does not seem to be acute yet, measures have to be taken now to prevent major deficits in the near future.
Budget Execution
The CFT requested that the Government of Sint Maarten present a budget amendment to address two shortfalls. The projected revenues from taxes on rental income from real estate owned by non-residents, which were incorporated in the budget 2012 for the amount of NAF 21 million, will not materialize. Secondly, the decision made by government to pay the remaining part of the COLA (Cost of Living Allowance; NAF 17 million) will have to be incorporated in the budget amendment. The Government of Sint Maarten will present this amendment shortly and the CFT will verify whether this will balance the budget of 2012.
The CFT also advised government to get rid of the COLA system and to replace it with another system or project that would reach the poorer people. Bakker said the current system in place for the indexation of the salaries is government's biggest burden and since the payments relates to 2010 then it has to be taken up in the balance sheets of 2011. Bakker said that the COLA payments were not even in the 2012 budget and therefore government must make an amendment for it in its 2012 budget. He stressed that the COLA structure is not suitable for the poor and therefore government must revisit the structure and come up with something else.
Annual Accounts
Sint Maarten recently communicated to the CFT that the draft annual accounts for 2009 and 2010 each show a deficit of over NAF 30 million. The Government of Sint Maarten is requested to take measures to compensate for the deficits in accordance with the Kingdom Law on Financial Supervision. The annual accounts have to be sent to parliament as soon as possible.
The CFT concluded that sound public financial management is a prerequisite for sound financial policy and for economic growth. Improvement of financial management will help to include all expenditures and revenues in the budget and to correct if needed during the execution of the budget. The CFT will not hesitate to use all instruments within the framework of the Kingdom Law on Financial Supervision to achieve sound financial management and a balanced budget in a sustainable way.
It should be noted that the CFT has its mandate until 2015 after which their services and advices will be reviewed and a decision will be taken then to see whether or not they should continue to provide guidance to St. Maarten and Curacao.
When asked by SMN News if the Government of St. Maarten informed them about TAXAND since they advised government to restructure their tax system, Bakker said that the Finance Minister did tell them of the TAXAND project and some of its findings but details of the project were not given to them because the Finance Minister is still gathering information about TAXAND. The team from the CFT also confirmed that Wednesday was the deadline of the extension they gave the Minister of Finance but up to the time of the press conference they did not get the letter they expected from the Minister of Finance. Minister of Finance Roland Tuitt said in an invited comment said that due to electricity failure in Philipsburg he was not able to deliver the letter on its deadline. Minister Tuitt said the letter will be turned in on Thursday.
Bakker said that the Minister of Finance promised him to deliver the 2013 budget by December and if that happens then it will be a good record for St. Maarten.
As for Max Pandt he is now back attending the meeting with the Government of St. Maarten and the CFT, when asked about that Pandt said he is relieved because with the former government that was not possible but on Tuesday when he attended the meeting several of the senators said "Max" is back.
