Tighten your belts
It will take some time to digest all the information provided by Finance Commissioner Roy Marlin at yesterday’s press briefing about the draft 2008 budget. It will also take some time for a complete and true picture of what the 2008 budget portends to emerge.
The bottom line though is that the government needs to collect more money to finance the increased expenditures projected in the 2008 budget. It has opted to do so by squeezing an additional 26 million guilders (about US $14.44million) from residents and visitors by using a one per cent increase in the Turnover Tax as its instrument of choice. Given its still very narrow tax base, it will also have to continue relying on wage taxes (NAf. 116 million or about US $64.44 million) as its largest source of income.
No one likes to pay increased taxes, so it will not be surprising if the proposal to increase the Turnover Tax by one percentage point meets with some stiff resistance. Of significance though is that the government opted to resort to an indirect taxation measure to raise most of the additional millions it needs to finance its operations, thereby ensuring that the impact is spread more evenly throughout the society.
Nevertheless, we recommend that the government in its infinite wisdom give serious thought to imposing this additional burden for only one year in the first instance, subject to review and possible non-renewal thereafter.
The fact that it has opted not to increase the vehicle licence tax and not to proceed with the introduction of either the garbage collection fee or the school bus transportation fee – both of which it has been planning to introduce for several years now – makes a lot of sense.
Its proposal to ask the Central Government to reduce the excise on gasoline by 15 guilder cents per litre and then compensate the Central Government by paying it the estimated equivalent of NAf. 5 million from the additional NAf. 26 million to be collected in the Turnover Tax, seems to be a rather roundabout, if not political approach to taxation that could complicate matters somewhat, but the motorist would welcome the relief at the pumps, however it comes.
It is evident that in compiling the 2008 budget the government, faced with a host of uncertainties and concerns about the already spiralling cost of living, found itself between the proverbial rock and hard place.
It seems to have come up with a reasonable commonsense approach as it manoeuvres itself between that rock and that hard place. But one thing is clear: Notwithstanding all the talk about debt relief and about the Social Economic Initiative (SEI) provided for in the November 2, 2006, Accord, a tough period lies ahead as St. Maarten prepares to assume greater responsibility for its own destiny as a separate country within the Dutch Kingdom. It must be prepared to pay its way and to paddle its own canoe as it moves upstream.
In this regard, it is unfortunate that while all and sundry will be expected to get on board and join in paddling upstream, the process of budget preparation remains far too exclusive.
Nevertheless, that is the lay of the land, at least for the time being. So, get ready St. Maarten. Get ready for some serious soul-searching and equally serious belt-tightening.
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