SER-advice meets with severe criticism

POSTED: 11/14/14 9:24 AM

St. Maarten – The advice from the Social Economic Council about former Finance Minister Roland Tuitt’s decision in 2013 to take all tax debts from 2006 and before off the books, has met with some serious criticism. The SER-advice labels the decision as unlawful and states that Tuitt wiped out 4.47 billion guilders (around $2.5 billion) in tax arrears.

“The suggestion that the country is missing out on 4.4 billion guilders in tax revenue is unfounded,” a source told this newspaper under guarantee of anonymity. “Old tax debts are practically uncollectable all over the world.”

Tax assessments leave the tax office with a delay of three to four years, the source notes. “If you mail assessments for 2009 in 2013 you will collect less then when you had sent them in 2010.”

The project New Tax Inspectorate the Department of Home Affairs and Kingdom Relations (BAK) worked on had some wonderful objectives. Finance Minister Martin Hassink has repeatedly hammered on one of them: his wish to bring the inspectorate and the receiver’s office together in one building and in one organization.

Another objective was to eradicate backlogs. Between 2009 and 2012, the project brought those backlogs back to practically zero. Quite some people received two or three assessments in one year because of it. According to our source, all these efforts have come to naught: “due to fresh backlogs we are now back in the old situation.”

“Tax claims older than five years cannot be collected anymore and they seldom yield anything,” the source said. “After 6 to 7 years it is really zero.”

Anything that is older should not be on the books anymore. “That is really ridiculous. Most of them are assessments, sent because the inspectorate assumed someone had a tax obligation. Some companies do not exist anymore, people cannot be found, or they passed away or left the island.”

Further criticism of the SER-advice: the 4.4 billion in tax arrears is not on the country’s balance sheet as assets. “They have been written off to practically zero, because they have no economic value anymore. It would be bad accountancy to attach monetary value to these arrears.”

The finance minister was within his rights with his decision to write off the tax debts, based on the existing ordinance that regulates the collection of taxes. Tuitt’s announcement that he wanted to regulate the write off in a new ordinance, was probably only necessary to eliminate the balancing of new refunds with old debts.

The SER’s accusation of détournement de pouvoir – using a means of power to achieve a policy objective in a different field – against Tuitt is questionable at best, the source said. “The minister is not doing that at all. This is tax policy in the field of taxes. Anticipating a new law is allowed as far as the measures you are taking fit within the framework of an existing law. In terms of good governance, the question remains whether this benefits the citizen. And it does.”

The principle of forgetting old debts and focusing on compliance is a good idea, the source said. “The problem of compliance is not that those who are known to the tax inspectorate pay too little, but that many citizens and companies are not known to the inspectorate at all. The weak point in Tuitt’s story is of course that the accompanying massive compliance offensive and the tax reform never took place. But these tax arrears were for more than 95 percent uncollectible – back to 1976. Don’t make me laugh.”

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