After the Committee for Kingdom Relations of the Second Chamber visited the Dutch Windward Islands mid-July they fired no less than 46 question at State Secretary Knops. These questions were answered by him on August 28. I would like to comment on two of the answers the State Secretary provided.
First I will comment on his answer on the question by the committee whether the amount of free allowance the islands are receiving is in relation with the cost they are facing. Mr. Knops, in his answer, acknowledges that on request of BZK already in 2015 a study has been done into the free allowances. He also acknowledges that the study established that the amounts were inadequate. According to the study, the free allowance for Bonaire, Statia and Saba is about 20 per cent too low. Still the cabinet has decided not to raise the free allowance but to focus on incidental financing of, for instance, infrastructural projects.
From the onset, with the establishment of the free allowance in 2011 the severe backlog, in particular in the infrastructure, was not taken into consideration. Therefore, in the budgets of the different islands there was no room to address this nor was and is there any money available for maintenance and depreciation. Not to mention the by-law-required so-called weerstandsvermogen (capital in reserve), which is needed to deal with unexpected events or shortfalls.
With Mr. Knops’ focus on extra financing of (much needed) investments in infrastructure and economic development outside the free allowance, he directly places extra burden on the budgets of the three islands. Maintenance cost and depreciation of these projects have to be financed by law from the existing island budgets. These investments will therefore further erode the spending power of the local governments when the free allowance will not be adjusted.
Mr. Knops further states that the free allowance has been increased from 35 million dollars in 2011 to 49 million dollars in 2018. This seems a substantial increase but is no more than the indexation based upon the inflation, which for instance in Statia since 2011 has been more than 20 per cent. Only this year, next to the inflation, for the first time also the salary indexation for civil servants, which is customary by municipalities in the Netherlands, will be taken into consideration. Since this was not done before, this means that, although the free allowance went up, the spending power of the three islands has actually decreased over the years. Correctly, Mr. Knops mentions that the local governments also have their own income from local taxes and levies. As a result of the steeply increased amount of tax collected by the national government and the decrease in purchasing power of our inhabitants caused by inflation and rising cost of living the local governments understandably are very reluctant to increase this rather small part of their income.
The second question by the committee members is about the increase in annual tax revenue in Bonaire, Statia and Saba. The agreed 54 million dollars to be collected in 2011 has increased over the years and is expected to be 158 million euros in 2018. Mr. Knops may be right that in the 54 million (I believe there is here a mix up with the currency) the premiums were not included. However already in 2012, when the total amount had already reached 90 million, the then state secretary of finance, Mr. Frans Weekers, came with some tax relief measures to compensate the islands for the additional collected taxes.
Mr. Knops attributes the increase in tax revenue to currency changes between dollars and euros, increases in population and economic growth. But is it plausible that these three factors, when assuming that premiums need to be added to the agreed amount of 54 million dollars, have caused an increase of some 50 per cent? And when checking the economic growth, the CBS figures on GDP for the three islands do not support the point of view of Mr. Knops. Bonaire’s GDP went up with 8 per cent, Saba’s GDP went up with less than 1 per cent and Statia’s GDP shrunk even with 4.4 per cent until 2016.
In my view this increase is not caused by a heavier tax regime compared to the former Netherlands Antilles, nor the reasons the state secretary is mentioning, but rather by improved compliance. Prices on the islands and their economies, however, were based on a decennia-long very poorly executed fiscal regime by the former Netherlands Antilles. The fact therefore remains that this substantial increase in taxes collected on the islands has had a negative effect on economic growth and development and has been, in my opinion, the main contributor to the steep inflation on the islands. To strengthen our small and fragile economics tax incentives and other stimulus packages for businesses and investors, but also for the consumers are needed to reverse this negative effect. The excess in taxes collected offers this solution.
I also am not so happy when Mr. Knops in his answer compares the increase in tax revenue to the increase in the expenditures of The Hague, which went up from 113 million to 360 million euros. I believe that this has no relevance. This is a comparison that is also not made in the European part of the Netherlands where the national cost of, for instance, Terschelling will be compared with the amount of taxes collected on that island.
Furthermore, the cause of this increase is foremost the gross underestimation of the real cost of the three islands at the time, especially for healthcare. As an illustration, in 2013 the budget for the Caribbean Netherlands already had doubled to 224 million euros not including the free allowance. It is also worthwhile to mention that from the 360 million for 2018 the total sum in free allowance spent by the three island governments is a mere 49 million dollars.
Democratic Party St. Eustatius