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CFT says ‘no’ to Government’s NAf. 25M budget amendment

page4b110PHILIPSBURG--It's a clear "no" from the Committee for Financial Supervision CFT to the Marcel Gumbs Cabinet on its proposed NAf. 25 million increase of the 2015 budget. The pending budget amendment seeks to move the total budget amount from NAf. 445 million to NAf. 470 million.

The "negative advice" is based on the income government is banking on being "too uncertain" and "highly unlikely" to be achieved by year-end, said Bakker. Government has been urged in the advice to stick to the original budget total.

Finance Minister Martin Hassink has prepared an amendment that is on the way to Parliament that is aimed at increasing this year's budget, which has not yet earned CFT's approval, by NAf. 25 million.

Asked about the pending amendment at a press conference on Thursday, CFT Chairman Age Bakker was very direct about CFT's view. He said the committee's advice would be delivered to Government today, Friday, and that Parliament had been informed of CFT's stance in a meeting held on Thursday morning.

CFT maintains its stance that government "must be realistic" about its capacity and ability to generate income. Focusing on increasing the budget at this time in the year does not have much merit and emphasis should be on meeting the requirements of the targeted instruction from the Kingdom Council of Ministers aimed at erasing Government's debts to the General Pension Fund APS and Social and Health Insurance SZV. Those debts total some NAf. 189 million.

The targeted instruction is "in the interest of financial viability" of the pension and health care system as well as the country's general wellbeing, said Bakker.

Government has until October 31 to comply with the deadline for the servicing of the arrears to social funds.

While Bakker expressed some confidence about Government meeting the requirements of the instruction by October 31, he said that if more time were needed, Government would have to indicate that to the Kingdom Council of Ministers and be ready to deliver on the instruction requirements by December 31.

"A visible amount needs to be settled" on the arrears this year, Bakker said. That visible amount can come from St. Maarten's shares of the still-undivided assets of the former Netherlands Antilles. The country should receive its due soon and CFT believes Government should use that money to clear its arrears. Government has indicated to CFT that this is its line of thinking as well.

The windfall from the assets division and the leasing of the still-to-be completed Government Administration Building on Pond Island should give government room to service its debt and get on a better financial footing, according to the CFT head.

Clearing the arrears would mean Government would have access to its ability to borrow to complete pending projects and commence new ones.

Government, as has been advised in the past, needs to put emphasis on tax compliance, broadening the tax base and obtaining dividends from the "healthy" companies it owns, said Bakker.

In the interim, Bakker warned Government off from any "creative financing" venture to accomplish its projects. "There needs to be a rebuilding of trust," he said, not more financial commitments.

Looking ahead, CFT stands by its recommendation to Government to increase the pension age from 60 to 62 as soon as possible. That law amendment has been pending for almost a year and several Parliamentarians have called on Government in the past months to deliver the law.

Strategy for Growth

CFT supports Government's plans to strengthen the economy structurally and lay the foundations for sustainable public finances.

"The Strategy for Growth program can help to strengthen the tax base, so as to provide the financial means needed for an adequate level of public services. An improvement of the financial management, strengthening of the tax authority and improvement of tax compliance should underpin this strategy," said Bakker.

While CFT supports the idea, it questioned the expected outcomes. The expected accumulated additional Government income over the period 2015-2018 "needs to be realistic, taking recent economic growth figures of not only St. Maarten, but also its main trading partners into account." Additional measures are needed to meet the terms of the targeted instruction, said Bakker.

Furthermore, Government is said also to project its income growth at some seven per cent of the country's gross domestic product (GDP) with an overall increase of some 30 per cent by 2018. This is simply not realistic, said Bakker.

He cited that the Central Bank of Curaçao and St. Maarten puts the country's tax-income-to-GDP ratio at some 18 per cent, while the Caribbean average is around 21 per cent.

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