THURSDAY, 14 JUNE 2012
PHILIPSBURG–Improvement of financial management must be “the main priority” for government, according to the Committee for Financial Supervision CFT, as it applauded government efforts to develop a five-year plan for this area. That plan should be presented by Finance Minister Roland Tuitt to the Council of Ministers and Parliament by the end of July 2012.
CFT Chairman Age Bakker said at a press conference Wednesday, it is important for government and Parliament to “embrace the five-year improvement plan and devote all resources to timely execution.” This will give Parliament concrete steps to monitor if the plan is properly executed.
The CFT board for Curaçao and St. Maarten held a round of “open and frank” meetings here this week with Governor Eugene Holiday, Council of Ministers, Tuitt and Parliament.
A mutual agreement was reached that all efforts should be directed to balancing the budget and improving the quality of financial management.
The financial plan will help to improve all expenditures and revenues in the budget. It will also aid with taking corrective steps in time, if needed, during the execution of the budget, Bakker explained.
The importance of good financial management and “real time” information on the liquidity position has become clear due to the realisation that Curaçao had a sizable deficit in its 2011 budget, he pointed out. That revelation came at the end of the year when it was too late to take corrective measures.
Strengthening of the functioning of the tax administration was also stressed by CFT. Government has been urged to soon finalize an action plan to achieve this. “A broader tax base and an increase of tax compliance will help the government fulfil the aspiration of the new country and to provide an adequate level of public services.”
Sustainable public finances in the longer term will require structural reforms in the area of health care, social security and old age pensions. Government, according to CFT, is to intensify its efforts to analyse the financial impact of projected developments in social security funds and health care cost, 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.
Government is also 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.”
The CFT requested government to present a budget amendment to address two shortfalls: projected revenues from taxes on rental income of non-residents, totally NAf. 21 million, which were incorporated in the budget, and the remaining part of the Cost of Living Allowance (COLA) of NAf. 17 million. This amendment should be presented “shortly” and CFT will verify whether this will balance the 2012 budget.
Bakker said government has informed CFT about the increase in revenue for the first five months of the year; totalling some NAf. 19 million. An analysis of this increase is now awaited by CFT as well as an outlook of what this means for revenues for the rest of the year.
CFT member for St. Maarten Richard Gibson Sr. said it was “premature” at this point to come to any conclusion about whether increased tax compliance led to the income jump or if other factors were in play.
Government had to respond to CFT’s concerns about the shortfall and its planned measures yesterday, Wednesday, as the three-week extension on the answer had ended. In the interim, CFT received some preliminary information from government during recent meetings.
Bakker noted that 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.
“At a certain stage you cannot repeat [that] you are a new country. At a certain stage you have to grow up,” he said.
St. Maarten has recently communicated to CFT that the draft annual accounts for 2009 and 2010 each showed a deficit of over NAf. 30 million, according to Bakker. Government has been requested to take measures to compensate for the deficits in accordance with the Kingdom Law. The annual accounts have to be sent to parliament as soon as possible.
The CFT chairman said it was “too early” to say if the deficit is structural. However, the deficit may indicate further efforts are needed to structurally improve the budget.
Bakker said it was discussed with Tuitt the need to start preparations in a timely manner for the 2013 budget to have it approved by the latest December 15, as required by law.
“We feel comfortable that this is doable and this would then constitute a major improvement over past years. … It is fair to say getting a balanced budget for 2013 will be challenging.” CFT stands ready to work with government in a constructive manner on the budget.
With the change of government, “some delays” in the budget process are there. Tuitt has given a “very clear indication” that he is “fully committed now” to get the process going as soon as possible and will work to get the budget approved by December 15.
“That would really be the first time and a major improvement, but I think this is doable,” Bakker said.