THURSDAY, 10 OCTOBER 2013
PHILIPSBURG–The Central Bank of Curaçao and St. Maarten (CBCS) was aware that Royal Bank of Canada (RBC) was charging individual accounts the one per cent foreign exchange licence fees on transactions for which the fee was not applicable.
Central Bank Deputy Director Financial and Economic Affairs Eric Matto told Parliament Tuesday, without mentioning the bank’s name, that “programming errors in the new system” implemented “by a local bank” saw the charging of the licence fee where it was not due. He said clients who noted the charges informed the bank and “the transactions were corrected.”
CBCS President Emsley Tromp and other bank representatives were invited to Parliament to explain the levying of the one per cent foreign exchange tax on the request of Members of Parliament (MPs) Johan Leonard of the United People’s (UP) party, Leroy de Weever and Roy Marlin of the Democratic Party. Their request followed reports about what appeared to be the improper levying of the licence fee by RBC.
Tromp added that the situation was caused by “a technical problem.” The lion’s share of the problem is the lack of training in administering the regulations. CBCS has stressed to the commercial banks that they have to improve their staff knowledge with training.
CBCS is “in dialogue with the bank” on various matters, Tromp said.
MP De Weever said what is odd is that the CBCS seemed to have been aware of the problems at RBC. “No redress” was given to the individual account holders. He asked for CBCS to sit with the bank to explain the proper way to levy the fee. Similar sentiments were shared by other MPs.
Questions from MPs mainly centred on the conduct of business by commercial banks. Tromp explained the existing legislations CBCS works with deals with the structure and performance of the commercial banks. “We do not have the necessary instrument to regulate the conduct of the institutions under supervision.” This issue was solved in the Netherlands with the creation of the IFM, an institution concerned with monitoring the conduct of commercial banks.
The licence fee, as of 10-10-10, became a tax. Tromp explained that the fee became a tax as it is no longer held by the Central Bank – it is paid to the two countries. The amounts are based on what is collected in each country.
Foreign exchange generated in St. Maarten in 2012 was some NAf. 24 million annually while Curacao generates NAf. 53 million. This makes the licence fee “a very important source of revenue” for the countries.
The licence fee due is equal to one per cent of the value of payments from residents to non-residents and the (cash) sale of foreign exchange.
The license fee is included in the (official) selling rate of foreign exchange. When US dollars are purchased at the bank at the rate of NAf 1.82, the licence fee is already included in that price. Tromp said the bank cannot add the one per cent licence fee on that amount.
Exemptions to the licence fee are government transactions, free-zone imports for re-export and re-investments of securities.
Foreign exchange banks pass on the licence fee to their clients for resident payments to non-residents and cash withdrawals from resident US dollar accounts.
Affecting the proper levying of the licence fee is the correct classification of “a resident.” Article 1 of the Foreign Exchange Regulation Curaçao and St. Maarten defines residency as a person living in St. Maarten/Curaçao, legally registered, with the intention to live for more than one year in St. Maarten/Curaçao. This definition also applies to companies or institutions established in St. Maarten/Curaçao with the majority of their activities in St. Maarten/Curaçao.
Another issue with the levying of the fee is that the open border with the French side makes it difficult for commercial banks to properly determine residency.
The volume of payment transactions with cheques is very high, according to Matto. It is indicated on cheques whether the issuer is a resident (R) or non-resident (NR). However, the issuer of the cheques does not necessarily know whether the casher of the cheque is a resident or non-resident.
For businesses, establishing whether a business was a resident or non-resident was difficult because the Chamber of Commerce Registry was not up to date. Also, companies were producing “dummy” registration from the French side “to evade” the licence fee, Matto said.
When it comes to transfers between accounts, the only time a licence fee is applied is when a resident transfers to a non-resident account.
The licence fee is applied when there is a withdrawal of cash in US dollars.
And in the case of cheques, it is imposed on residents when they cash dollar cheques against either a resident or a non-resident account. If a non-resident cashes a cheque against a resident account, the fee is charged at the end of the transaction.
On cash deposits, the only time the fee applies is when a resident deposits a cheque on a non-resident account. If it is on a resident account, the fee is not applied.
The law governing foreign exchange transaction is some 40 years old with several amendments made since then.
Source: The Daily Herald, St. Maarten