Revenue slams Finance for inaccuracy

The Ministry for Revenue (M.F.R.) has accused the Ministry of Finance (M.O.F.) of producing inaccurate financial forecasts.

In its response to the to the Foreign Affairs, Trade and Revenue (F.A.T.R) Committee on the M.O.R.’s Annual Reports for the Financial Years of 2008-2009, 2009- 2010, 2010-2011, 2011-2012 and 2012- 2013, the author of the document says the reason for this problem, is that the Ministry’s use different models to make these forecasts.

Associate Minister, So’oalo Mene, serves as the Committee’s Chairman.

In the original report the Committee made seven separate recommendations.

Recommendation number five concerned itself with cooperation between the two abovementioned Ministries.

“Recommend [sic] the cooperation of the Ministry of [sic] Revenue and the Ministry of Finance to ensure that the accurate estimation of revenue to prevent the repetition of issues occurring,” the recommendation reads as it appears in the Committee’s report, which was tabled earlier this year.

In regards to this issue the F.A.T.R.

Committee reported that the Ministry collected a total of $384.8million tala or 97 per cent of its budgeted revenue of the SAT $396.2million appropriated to be collected.

“Total spending was appropriated at $8.9million tala however the Ministry actually committed only $8.4 tala."

“With the revenue, the estimated income should be reached or there should be an increase. Those preparing the estimates should consult with the Ministry of Finance."

“The Ministry believes that even if five per cent cannot be received it is still satisfactory.”

In regards to unpaid tax, the Committee reported that the M.F.R. had records of its total unrecovered debts for this Financial Year.

“Various businesses are operated differently therefore their taxes are also different,” the report reads.

“The system to resolve this issue has now been implemented.”

During its deliberations, the Committee noted that some issues needed responses from the M.O.R. regarding targeted annual revenue and actual revenue collected.

“Oral evidence was provided by the Ministry but the Committee requested written information to further shed light on the matter,” the Committee reports.

“However, the requested information was not received by the time this report was completed.”

In response to this recommendation, the author writes that the M.F.R. continues to work with the M.O.F. in forecasting revenue estimates each year to finance the budget.

“Although different models are used,” the response reads.

“The Ministry of Finance uses an economic model that takes account of the growth of the economy and sometimes as with all forecasts, these are never accurate - they are only estimates or predictions."

“But my Ministry will endeavour to work together with the Ministry of Finance to ensure the estimates for revenue are robust and that they are achievable."

“But bearing in mind that at the end of the day, the Ministry of Finance will decide on the basis of the budget parameters as they are in charge of the government budget.”

The response to the Committee’s reports is republished in full below:

Response From Government To Recommendations Contained In P.P. 2013/1014 Nu. 110, Report Or The Foreign Affairs, Trade And Revenue Committee On P.P.2012/2013 Nu. S1, P.P.2012/2013 Nu.

Ea, P.P. 2012/2013 Nu. 69, P.P. 2012/2013 Nu. 70 & P.P. 2013/2014 Nu. 70 Annual Reports Or The Ministry For Revenue For The Financial Years 2008/2009, 2009/2010, 2010,2011, 2011/2012, & 2012/2013 Recommendation 1. Appropriate funds within the Budget to allow for the funding of necessary additional positions within the Ministry.

Response: The Ministry under its ongoing Customs Modernisation Project is currently reviewing and looking at restructuring the Customs Service and support services;

this will involve aligning the structure to workflows for effectiveness, reviewing functions and job descriptions and developing training/skills requirements and framework. This component of the project is supported through assistance from the New Zealand Customs Service and is fully supported by the PSC. It is anticipated that when the review is completed around the end of June, implementation will commence. I take this opportunity to thank the NZ government through the NZ Customs Service for the assistance rendered, as well as the tremendous support from the Office of the PSC and the Ministry of Finance to this most valuable and important project to the work of the Ministry for Revenue.

Recommendation 2: Consider a new building to house these divisions: the Legal and Technical Support Services, the Internal Audit and Risk Service, and the Information Technology Services because of the unsafe and deteriorating state of the current building.

Response: In all honesty, what is required is a new building that houses all Divisions of the Ministry that are currently scattered in three (3) locations. But due to budgetary constraints for the government overall especially in the lead up to the SIDS conference, we are planning now to seek funding for renovations and giving the old building a facelift enough to safeguard the staff as well as the huge IT assets housed in the building. We have requested for this funding in the next year's budget but as of time of writing of this report, we do not know if this has been accepted.

Recommendation 3: Consider the purchase of a backup generator. The systems used for the Customs service's need an uninterrupted source of electricity to allow for the efficient service delivery.

Response: This is included in our budget proposal for the next financial year (2014/2015) and at time of writing, we have not heard if the request has been accepted.

Recommendation 4: [Rebury]/raise the Customs Office container storage area that has been affected by soil erosion.

Response: We will coordinate with the Samoa Ports Authority (SPA) for this major work as well as putting in proper drainage to avoid flooding of the bond store as this area is now lower than the outside yard.

Recommendation 5: Recommend the cooperation of the Ministry for Revenue and the Ministry of Finance to ensure that the accurate estimation of revenue to prevent the repetition of issues occurring.

Response: My Ministry continues to work with the Ministry of Finance in forecasting revenue estimates each year to finance the budget, although different models are used; the Ministry of Finance uses an economic model that takes account of the growth of the economy and sometimes as with all forecasts, these are never accurate - they are only estimates or predictions. But my Ministry will endeavour to work together with the Ministry of Finance to ensure the estimates for revenue are robust and that they are achievable but bearing in mind that at the end of the day, the Ministry of Finance will decide on the basis of the budget parameters as they are in charge of the government budget.

Recommendation 6: Recommend the Ministry thoroughly prepare and check their Annual Reports before tabling within Parliament. The Committee's investigations of the Annual Reports brought to light some errors in the information provided.

Response: l regret that the Committee had to be faced with errors in the reports submitted and I can assure the Committee these were unintentional but mere typing errors.

The Management will be advised to scrutinize more carefully the reports before submission to Parliament.

Recommendation 7: Recommend the Ministry to adhere to the provisions within the Public Finance Management Act regarding the timely completion of Annual Reports.

Response: Thank you for the recommendation; I can say with some certainty that this will not recur and will probably be the last time reports from my Ministry will be submitted late. As you will note, whilst the reports for 2008/2009 - 2011/2012 were delayed and tabled at the same time, the report for FY2012/2013 has now been tabled and my Ministry was probably the first to do so for the last financial year.

I take this opportunity to congratulate and thank the Foreign Affairs, Trade and Revenue Committee for the hard work and the comprehensive review of the reports for this Ministry. Thank you for the recommendations provided especially those in respect of areas that the service provided by the Ministry for Revenue can be improved to better serve the public. My Ministry‘s Management will take this on board and look to improving on areas that the Committee have recommended for a better service.