Transforming Tax Administration to Result in Economic Revival and Secure Government Finances & Investments

The Minister of Finance Hon. Perry Geerlings said on Thursday that the transformation of the country’s Tax Administration will result in further national economic recovery and providing a sustainable secure system for future government finances and necessary investments into the public sector.

“For years we have neglected to properly invest in our Tax Administration, our primary source of income. The Tax Administration is not well equipped and unable to properly execute its task to levy and collect all taxes that the government is entitled to.

“As a result, the Government does not have enough income to pay for its public services, with the following serious consequences: Annual budget deficits that have to be financed one way or the other; the need to constantly borrow money, with accumulating debts which must eventually be paid back with interest; with the danger of imposing a huge mortgage on our children and future generations; inability to structurally invest in further developing our country and economy; dependency on Kingdom support for loans, grants and liquidity support; with a subjection to interference, instructions and constraints put on us by the Kingdom; which at times seriously undermines our autonomy; and a viscous circle of constant deterioration and decline which is not healthy for the national sustainable socio-economic long-term development of the country and its people.

“The goal of the reforms of the tax system is not to raise taxes but make everyone contribute their fair share. Close to 20 reports have been written over the years about our Tax Department and Tax System, and our Public Finance Management, with recommendations to urgently reform both.

“It is about time we start to go to work to fix this huge and dangerous problem. That’s why our plans of action for the reforms at the Tax Department and Public Finance Management Department are strongly supported by the Committee for Financial Supervision Cft, the Dutch Ministry of Interior and Kingdom Relations, the International Monetary Fund (IMF) and the World Bank.

“Without this strong support we would have never been facilitated and supported with the financing of these projects via grants through the World Bank Development Policy Operation (DPO) facility. Fixing our finances means strengthening our autonomous status,” Minister of Finance Hon. Perry Geerlings explained.

The 2019 National Budget of Naf. 483 million is reserved for expenses, and Naf. 93 million for capital investments. Approximately one third -Naf. 32 million- of the capital investments is reserved for Tax Transformation.

Minister Geerlings adds: “We need money to invest and develop Sint Maarten, its people and its economy! This vicious circle can only be reversed by a fundamental structural improvement of our Tax Administration, and overall, that should lead to increased income, a balanced budget and eventually budget surpluses to pay off our debts which are currently approaching one billion guilders.

“Additional investments in the National Recovery and Reconstruction Program and the further development of Sint Maarten, its people and its economy, without interference of The Kingdom in determining our priorities, can only be achieved by having our own financial house in order. We have to focus on becoming more self-reliant and less dependent on others and standing up on our two feet as a proud people and nation.”

The Minister of Finance Hon. Perry Geerlings said on Thursday that we must also be cognizant that Sint Maarten is still under financial higher supervision since 2015, and that the country is limited to only being able to borrow Naf. 40 million per year to finance the capital investment budget.

The remaining Naf. 53 million in capital investments is financed through the Development Policy Operation a grant mechanism of the World Bank and other means.

The Government of Sint Maarten is guaranteeing substantial investments in the economy like for example the US$101 million loan for SXM Airport and pending financial support for the Small and Medium size Enterprises (SME’s) for an earmarked amount of US$ 34 million.

“The way to go for substantial investments in the economy at this juncture in our recovery phase is primarily through the Trust Fund at the World Bank and private investments. Ministry of TEATT and all other ministries are doing their utmost to get that process dramatically improved.

“Without a balanced budget and enough funding to keep the government apparatus running, the Netherlands will never allow us to invest substantial amounts in the economy through the Capital Investment Account, hence why we have to take the necessary steps and measures to transform our current tax system which has been neglected for decades.

“In 2018 we applied for a big loan from the Netherland’s loan facility, via the Central Bank of Curacao and Sint Maarten, of NAf. 200 million, for the biggest part to be used for restoring/boosting the economy shortly after the hurricane disasters. This request was denied because of their worries about the already existing high government debts and the risk of Sint Maarten not being able to pay back such high amounts.

“We cannot continue down the same road that we have been walking. We have to transform our national tax system if we want to be self-sufficient and less dependent on others. Our Economy is growing, and tourism is picking up. Many investments are being made in rebuilding and repairing the hotels, restaurants and other tourist-related infrastructure.

“These investments are mainly made by and through the private sector, who has the greatest interest and stands to benefit the most, and other investments come from insurance payouts. Besides private sector investments and insurance payouts, the Government is also investing in the rebuilding of the tourism infrastructure through loans from the European Investment Bank (EIB), the Recovery Trust Fund at the World Bank, investment tax incentives, accelerated permit and license application processes, etcetera.

“The private sector will of course not invest in the tax authorities in transforming our tax system infrastructure, that is the government’s responsibility, and at this point in time we are making the necessary investments to secure a sustainable bright future for country Sint Maarten.

“The only way to have enough money to pay for Government’s primary responsibilities like education scholarships, justice, safety and security of the population, healthcare, social security, infrastructure, etc. and pay the civil servants and teachers is through the levy and collection of taxes, but you need to have a modern-day system of the 21st century in place in order to fully accomplish this where everybody pays their fair share, and that is what transformation of our tax system is all about in order to assure continued economic revival and secure sustainable Government finances & investments for the future,” Minister of Finance Hon. Perry Geerlings concludes.