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Tax-Collecting Agency Will Get Budget Priority, Senators Say

June 29, 2007 — The woman in charge of collecting tax money for the territory made the case for how her department will use its share during a Senate Finance Committee meeting Friday in Frederiksted.
Designated Internal Revenue Director Gizette L. Thomas defended the IRB’s fiscal 2008 budget request of $10,915,677 during preliminary budget discussions. The amount is an increase of $180,080, or a little more than one percent, over the previous year’s budget appropriation.
The hearing was an information-gathering exercise, and no votes were cast. However, the senators told Thomas her bureau’s budget would likely face little difficulty.
“Since your bureau is collecting money for the government, it behooves us to give you every bit of assistance we can, so you can get us every dollar due in taxes,” Sen. James Weber said.
The IRB’s total budget also includes $120,000 from the federal government for capital expenses, bringing the bureau’s total estimated budget to $11,035,677.
“Historically the bureau collects an average of more than 80 percent of the revenues that sustain the general fund,” Thomas said in her opening testimony. “Specifically the income tax, both individual and corporate, the gross-receipts tax and excise tax are the major contributors to the General Fund."
Thomas’ testimony was highly specific and packed with detail.
“Our budget request seeks $9,014,136 for personnel costs and the associated fringe benefits, $1,901,451 for operational costs and $120,000 for capital outlays,” she said. “For salaries, we request $6,733,918. This amount will allow us to maintain 178 positions, which represent 106 employees on St. Thomas, 52 on St. Croix and three on St. John.”
The bureau measures its own efficiency primarily by the number of tax returns processed by May 31 — 45 days after the filing deadline of April 15, Thomas said. After 45 days, the bureau must pay interest on outstanding balances.
“In fiscal year 2006, we processed 25,498 income tax returns with refunds by May 31,” she said. “This fiscal year, we processed 24,645 returns within the same period. Significantly, for the latter period, this was accomplished without incurring overtime costs for data entry, as was done in the prior fiscal years.”
Thomas updated the Legislature on tax revenue collected so far this year.
“As of June 27, revenue collections for the 2007 fiscal year total $558, million,” she said. “This represents individual income tax receipts of $323 million, corporate income taxes of $83 million, gross receipts tax revenue of $108 million, $18 million in excise taxes, special fund deposits of $25 million and $1 million in other, miscellaneous taxes.”
One area of concern for the senators was the amount of tax owed but not collected.
“Do I understand that your accounts receivable is $177 million?” Weber asked.
“That reflects a 10-year period,” Thomas replied. “Of course, it is easier to collect the more recent debt. I think it is more reflective of what is happening to say we have a delinquency rate of about four percent. We collect 96 percent every year.”
Weber asked how much of the delinquent total is realistically collectible.
“I can’t guesstimate,” Thomas said. “I can tell you on average we collect $20 to $21 million every year in delinquent taxes. … The greatest delinquency is in gross receipts tax payments, followed by corporate income tax and then withholding (personal income) taxes.”
Gross receipts taxes account for $61 million of the delinquent total, she said. Much of that is due from businesses that no longer exist or individuals who have no resources, however, and so it is not collectible, Thomas said. Asked about the success of a recent gross receipts tax amnesty, she said it brought in $7 million and forgave, or abated, $6.6 million in interests and penalties.
The Legislature’s post-audit report on the IRB’s budget shows that the bureau maintains a fleet of 24 vehicles, 23 of which are Chevy Blazers. All are 2002 or more recent models. The bureau isn’t requesting funding for any replacement or new vehicles at this time. Five vehicles are listed as being assigned to audit enforcement and three for collections. The rest are primarily listed for management use.
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