As of March 31, 2016, “the amount of payroll, hotel occupancy, corporate services and land taxes greater than 90 days in arrears was $90.6 million compared to March 31, 2011, when the comparative amount owed was $46.3 million”.
According to the Auditor General’s latest report, “taxpayer indebtedness to Government” continues to increase “as the unfunded liability increases, arrears of payroll and other taxes and pension contributions also continue to increase”.
In fact, Ms Heather Thomas stated outright that: “Measures to reduce taxpayer indebtedness to Government have been largely unsuccessful”.
As a result, she has called for: “More effective collection of outstanding revenue by Government would help reduce the need for borrowing along with its associated finance costs.”
At last check, she said balances between $0 to $5,000, were “previously excluded” in reports. As a result, she said,: “It was recommended that Government should establish and communicate a plan to address taxpayer indebtedness.”
She noted that the Ministry of Finance “agreed and indicated that the Government was looking at increasing resources in its Debt Enforcement Unit (DEU) to assist with debt collection as this was a high priority of Government”.
But Ms Thomas said: “Whatever actions have been taken in the intervening years…they have not been successful”.
“Accounts receivable of the Office of the Tax Commissioner have increased by $37.3 million (approximately 20.5%) over the five-year period ended March 31, 2016.
“The provision for doubtful accounts has increased over the same five year period by $43.5 million (approximately 114%).
Her recommendation: “Government should establish, communicate and resource appropriately a plan to address the significant taxpayer indebtedness.
“Unfortunately due to the extended recession there are many small businesses that have struggled to meet their tax obligations in a timely fashion.”
According to the Ministry: “This has resulted in some increases in the level of indebtedness to Government.”
It was also noted that “Government will work with these businesses to make suitable arrangements”.
“However, there are others who simply ignore their obligations. For this group, Government will continue to use all available means to collect overdue taxes, thereby improving Government’s cash flow and reducing its need for borrowing.”
The Ministry also noted that the Tax Commissioner’s Office has “their own debt collection resources” to pursue taxpayers “and once all efforts to collect receivables have been exhausted, the debt may be referred to the DEU of the Attorney-General’s Chambers for Supreme Court Writs”.
“Currently revenue collecting departments are supported by the various Departments who will withhold permits and vehicles where taxpayers are in arrears with taxes.
“Government has also used the offsetting provision in the legislation that allows Departments to claw back any monies due to taxpayers from Government (i.e. Works and Engineering contracts). Also, Departments have set up installment plans and have successfully progressed matters in the courts through the Department of Public Prosecutions.”
A series of meetings were held by the Tax Commissioner, the Director of Department of Social Insurance and the Director of Public Prosecutions “to address the situation of delinquent employers and unpaid Payroll Tax and Social Insurance Contributions”.
It was also stated that both the Tax Commissioner and the Director of Social Insurance “will start to forward employer files to the Director of Public Prosecutions for prosecuting employers, companies and individuals, for offences related to delinquent payments pursuant to their respective legislation”.
“The Ministry recognizes that further action is required in order to facilitate the settlement of Government debt as a priority and will provide the appropriate resources required to meet this objective.”
On the issue of spending within Parliamentary limits, the Auditor General noted that in the previous report “that for a number of years, many ministries, departments and legislative offices had exceeded the limits imposed on their annual expenditures by the House of Assembly”.
“In fact, the annual over-expenditure by departments had become ingrained behavior in the conduct of Government officials for which there were no consequences.
“This habitual overspending by Government ministries and departments raised questions about the credibility of the budget process, expenditure control and the cash management functions carried out by the Ministry of Finance.”
This despite recommendations that “Government renew its commitment to ensure that unplanned spending receives the full consideration and prior approval of the House of Assembly and the consequences for noncompliance should be enforced”.
Ms Thomas recalled the Ministry’s response which stated that: “All pending supplementary estimates are now taken to the House during the budget session before a ministry has overspent its Budget appropriation.
“Overspends are now based on ministry totals because departments can overspend as long as funds are wired (transferred) to the department and the Ministry total does not exceed the amount appropriated for the Ministry.”
While noting that she was pleased “to report that, although total expenditures have reduced little over the last five years”, she said: “The amount of overspending in relation to limits set by the Legislature has.
“In the four years ended on March 31, 2016, total spending was lower than the adjusted estimates and, in the last two years, the amount of supplementary estimates required has fallen to a more reasonable level (an average of approximately 1.65 percent of total estimated spending).
Despite the overall improvement, she said “there were still a few cases of ministry and department overspending”.
“It is the responsibility of all public servants to ensure that public monies are spent in accordance with the appropriate legislative authority,” said Ms Thomas.
She also noted that the previous report stated “that many of the capital development transactions selected for testing did not comply with Financial Instructions and related rules”.
“It was explained that the issue was not whether controls exist, but, rather, that the controls were being ignored or overridden, with those responsible seemingly immune to the imposition of penalties and sanctions built into Financial Instructions.
“While in Section 3 of this report I refer to instances where the Financial Instructions were not followed.
“In many cases the reality is that mistakes were made rather than there being a willful ignoring of the instructions as was the case in the earlier report.
“However, I do offer a word of caution with respect to what may seem like an improvement in the application of the Financial Instructions in the last four years,” Ms Thomas said.
“Most of the serious infractions reported previously such as lack of the required approval of Cabinet, no agreements or contracts and not following the procurement tendering process were in connection with large, one-off capital projects.
“Due primarily to the Government’s serious financial condition, there has not been a great deal of capital expenditure witnessed in the first part of this decade. This fact may be the largest contributor to the reduced number of instances of noncompliance with the Financial Instructions.”