July 10, 2006 – While Gov. Charles W. Turnbull's budget recommendation of $10.9 million for the Internal Revenue Bureau is approximately $77,000 less than what the agency requested, IRB Director Louis Willis told senators that it is enough to keep the agency running during the next fiscal year.
In fact, Willis came in support of the proposed recommendation during budget hearings Monday, and outlined exactly where the funds would be going.
Willis said a majority of the budget – approximately $6.4 million – would go toward personnel costs, including salary increases negotiated for employees. He said the amount would allow IRB to maintain 180 positions, including 105 employees on St. Thomas, 52 employees on St. Croix and three employees on St. John. The remaining 20 positions are vacant.
In response to questioning from senators, Willis said the Bureau has hired 14 new employees within the past two weeks, and plans to fill its remaining vacancies by the end of the year. However, Willis added that vacancies within the agency are like a "revolving door," since new vacancies are created after employees are promoted in-house to open slots.
Willis also said that funding the $6.4 million is "critical," since the agency is seeking to staff its Criminal Investigations Division, the prosecuting arm of the Bureau responsible for "locking up" tax evaders.
In addition to requesting approximately $2 million for fringe benefits – which assists in paying for employees' insurance and taxes, among other things – the Bureau is also asking for approximately $1.1 million to pay rent for its two facilities on St. Thomas. Willis said one of the facilities is a storage space used to house tax returns and prior year tax forms.
Willis said the Bureau's rental obligations would be decreased if the agency is able to obtain $4 million to expand its St. Croix office. "Our vision for the Bureau today includes the expansion of the St. Croix office by 14,000 square feet," he explained. "This will be more efficient for taxpayers…because it would allow us to expand the processing branch on St. Croix to allow for the same processing functions on both islands."
He added that it would also streamline the tax return process by allowing files to be stored in both districts.
Willis said the new facility has been a dream of his for the last three years. To jumpstart the process, he said, IRB would be using approximately $350,000 in funding from Fiscal Year 2006 to draw up plans for the facility. Additionally, Willis said the Bureau would be using approximately $630,000 in projected excess funds to secure a mortgage loan through the Public Finance Authority.
In response to questioning from senators, Willis explained that as of April 30, the Bureau had spent about half of its FY 2006 allotment. "We've spent about $5 million out of the $10.9 million we were allotted," he said. "So we do predict an overage."
Willis justified the need for an additional $4 million by touting several accomplishments the Bureau has made over the last fiscal year – including the reprogramming of approximately $700,000 allocated for vacancies. He said the money has gone toward funding other Bureau positions.
Furthermore, Willis said IRB has had a "record-setting year" and was able to process 28,316 tax returns by June 2, while incurring a "minimal" $9,114.19 in interest. He also said the agency has so far collected $583.8 million in revenues for FY 2006.
"On average, these collections were deposited into the Treasury of the Virgin Islands within 24 hours of receipt by our cashiers, without one penny missing," Willis said.
He added that the Bureau is currently pushing a law that establishes an 11-month window in which all interest and penalties are waived for residents who have not paid their gross receipts taxes. The provision was one of several amendments attached to a recent supplemental budget bill, signed into law by Turnbull in May.
Using this information, Willis asked senators to grant the IRB a lump-sum budget for 2007 – which raised concerns for some senators.
"Most of us here are opposed to that idea," said Sen. Norman Jn Baptiste. "And we're generally reluctant to grant lump-sum budgets to any department or agency."
After assuring senators that IRB "does not spend wildly," Willis said that a lump-sum budget would allow the agency more flexibility in funding "critical" areas during the fiscal year.
While senators said they were "impressed" by Willis' presentation, they did say the bureau should implement a mechanism to check whether hotels in the territory have fully paid their taxes.
Present during Monday's meeting were Sens. Roosevelt C. David, Liston Davis, Pedro "Pete" Encarnacion, Juan Figueroa-Serville, Hill, Neville James, Jn Baptiste and Usie R. Richards.
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