Uncertainty over federal tax policy has caused the annual advance payment of excise taxes collected on Virgin Islands rum to be cut by 26 percent from the amount requested by the Virgin Islands government, V.I. Office of Management and Budget Director Debra Gottlieb said Wednesday.
The reduction is a result of a decision made by the Department of the Interior, which will reduce contributions to the General Fund for the new fiscal year that opens on Oct. 1.
The V.I. government had requested an advance payment of $263.9 million. Due to uncertainty over congressional budget talks, the U.S. Department of the Interior has reduced the amount it will advance to $193.1 million – $70.8 million less than requested, according to Gottlieb’s statement, released Wednesday by Government House.
“We received notification of the reduction recently, after making our official submission in mid-August,” Gottlieb said, adding that she had already shared the anticipated negative effect of the reduced sum to Senate President Shawn-Michael Malone, Finance Committee Chairman Clifford Graham and Legislative Post Auditor Jose George.
Gottlieb explained that at the beginning of each fiscal year, the U.S. Department of the Interior advances to the Virgin Islands the amount of excise tax revenues estimated to be earned during that fiscal year, based on estimates provided by the territory’s local rum producers: Beam Inc., which owns Cruzan Rum, and Diageo PLC, which produces Captain Morgan’s Rum. Both distilleries are on St. Croix.
Gottlieb explained that the request for Fiscal Year 2014 was based on the estimated rum production, calculated at the existing cover-over rate of $13.25 per proof gallon.
“In its response, Interior took note of the fact that the current rate expires on Dec. 31, at which time it will revert to $10.50 per proof gallon unless Congress acts to extend it,” she said. The $2.75 extension has regularly been approved.
But this year, Interior calculated the advance payment based on the $13.25 rate until December, then on the $10.50 rate for the remainder of the fiscal year, January to September 2014.
“The past practice of Interior has been to pay at the existing cover-over rate, therefore this change was not expected,” the OMB director explained.
Gov. John deJongh Jr. said Wednesday that the cover-over rate is extended by Congress every two years, but that this is the first time that Interior has prospectively reduced the advance payment. When the cover-rate is extended, it is normally a retroactive calculation, allowing the cover-over rate to remain at the higher dollar value, thereby ensuring the Virgin Islands get the payment at $13.25.
Gottlieb said that in the past, once the cover-over rate extender has been approved by Congress, the government received an adjustment within a relatively short period of time.
“However, because of the debate in Congress regarding tax reform, it may be some time before the rate is extended,” she said.
The governor said the V.I. is keeping a close watch on the debate.
“The issue of tax reform is one that we are closely monitoring and making sure our positions on the cover-rate, statute of limitations and residency requirements are being heard by the Senate’s Committee on Finance and House Ways and Means Committee,” deJongh said.
So that’s less money for the government to waste! Then again they will just add another tax or increase a percentage point here and there until their pockets are satisfied which doesn’t last very long.
Isn’t a big part of the delay in pre-payments directly due to an error in calculations of actual proof per gallon?? I believe the GVI estimated the cover-over incorrectly, as the proof (percentage of alcohol)is vastly different between Cruzan at 80 proof and Capt. Morgan at 70-something proof? This really has little to do with tax reform, but more to do in the proof-per-gallon calculation.
Once again, The Source is trying to deflect the truth, in favor of the Administration.
And pray tell, where is that congresswoman who says she does so much for her constituents?? Buying another pair of shoes?
This entire charade is more smokescreen and un-truths. The VIG is trying to cover their backsides because they have, as is now common, really screwed things up. But no worries (hahahah), the Governor has it all under control. NOT!
I think that probably that any error in calculations regarding the proof per gallon is a relatively minor variable in the function. Keep in mind that these are calculations intended to “estimate” a sum.
Even though the feds have historically extended the $13.25 rate, that in no way guarantees they will continue to do so nor are they obligated in any way to do so. You have to ask youself why they continued to extend it and not just change the law and make it permanent. It would have meant less work for them and we all know how politicians like that. My thought is that that particular gravy train is about to dry up. I think that its a message from the feds that they arent going to do it anymore. Also keep in mind that these are “advanced” funds. This isnt even money thats been collected yet. It would be like getting an extimated tax return check for next year based on what you made the previous year. basically a gift.
hey, if you dont want this to happen in the future and you want to be able to project the vi governments receivables then they should get christiansen busy finding out how to change the law, and then do it. thats what her job is isnt it? The feds are just doing their job and determining the correct amount according to existing law. Politicians that represent us are supposed to have their act together and not rely on probabilities and hope regarding the budget. the difference between an elected official in the states and here is the politician in the states would be embarrassed to admit to such stupidity. Here they throw their hands up and say “thought they were going to give us more”
Governor deJongh tried to pull a fast one on Uncle Sam. Not to many governors have gotten away with stealing public money. The saga of a pathetic governor continues down a disgraceful path here in the United States Virgin Islands.