St. Maarten News – Dutch preparedness to assist St. Maarten with the strengthening of the tax inspectorate went only that far and dollarization would free up 250 million guilders for capital investments, Finance Minister Richard Gibson said yesterday during the meeting of the central committee of parliament about the handling of the draft 2016 budget.
The minister reached an initial agreement about the support during his first visit to the Netherlands last year, but soon after it turned out that the Netherlands demanded €1.5 million in compensation for travel and housing expenses. “We could not afford that,” the minister said.
“The tax inspectorate needs more human resources. To achieve a significant improvement these people will need to be hired, but we can only hire them once we have earned the money.”
At the same, time, the minister said that the tax inspectorate could work more efficiently in terms of collection. “That would lead to increased compliance. Currently our tax compliance runs 4 percent behind the Caribbean average. With basic efforts, that could add 18 million guilders to the treasury.”
Minister Gibson explained how the country had to build up its police force from scratch after 10-10-10. “Before that date is was the responsibility of the Netherlands Antilles. After that date, the responsibility migrated to St. Maarten but the expertise and the know-how stayed in Curacao.”
Funds for the expansion of the Pointe Blanche prison were also available in the time of the Netherlands Antilles, but according to the minister, all that money went into the upgrading of the prison in Curacao and other projects over there.
“Our prison is full and we need money to expand it. We did not get all the money from the debt relief program; we could have used that.”
During his visit to the Netherlands, Minister Gibson said that the Kingdom as being “pennywise and pound foolish.” He pointed to St. Maarten’s debt: GDP ratio which is, at 36 percent, the best in the world. Aruba’s ratio is 80 percent, Jamaica 110, St. Kitts 90. The Netherlands, the United States, France and England, all have worse ratios than St. Maarten.
“This means that we are able to sustain a higher ratio than we currently have,” Minister Gibson said. “With a shift from 36 to 44 we would still have the best ratio in the world. That would give us 2 billion for investments in the police force, the civil service and other institutions. But we are not allowed to do that because we agreed to a system that requires us to have a balanced budget. That is why we are stuck in this boat.”
The minister said that it is “a waste of time” to ask the Netherlands for help because the political sentiment in that country is “polluted.”
“That is a reality. They have their politics to deal with. The solution would be dollarization. To support the system that pegs the guilder to the dollar there are reserves sitting in a vault that do absolutely nothing; it is just a requirement for the peg. If we stopped using the guilder, our share of these reserves (approximately 250 million) would become available.”
Minister Gibson said that St. Maarten has no need for a Central Bank after dollarization. “Puerto Rico does not have a Central Bank; we could invite the Dutch Central Bank to take care of the supervision of our financial institutions. That would eliminate all the talk about money laundering. I invite you to think about this,” the minister told Members of Parliament.
Minister Gibson told the central committee that the country has experienced “an explosion of consultants, saying that they are hired for everything under the sun. “I have stopped every consultant proposal that came to my desk,” he said, adding that he had canceled a 1.7 million guilders contract with KPMG about a growth model project.
“We can do much more on our own,” the minister continued. There are expert reports lying around that we could use. Some experts do a job in Aruba, then they come here to do the same job and charge for it again. And almost every consultant is from another island, or from another country.”
If those consultants were local, the minister pointed out, 30 percent of their earnings would flow back into the treasury in the form of taxes. “We are supporting capital flight this way. Consultants charge up to $500 per hour and on top you have to pay their hotel, their rental car and their per diem. If they bring two or three assistants, we have to pay for those people too. We cannot afford this and we have to turn this around.”