Published On: Mon, May 10th, 2021

No satisfaction for BearingPoint in dispute about tax transformation

PHILIPSBURG — After the change of government in 2019 nothing has been done about plans to transform the country’s tax system. “The current government does not consider fiscal transformation opportune,” the Court in First Instance writes in a ruling about a dispute between BearingPoint and country St. Maarten.

BearingPoint Consulting demanded in summary proceedings that the government signs agreements for the execution of an ICT-contract for the tax administration worth 15 million guilders. But the court denied this: “A ruling to abide by the ICT-agreements cannot lead to anything. That is not in the interest of both parties, also not in the interest of BearingPoint and not in the general interest.”

That BearingPoint has made countless investment and has kept personnel available for this project does not outweigh these interests, because BearingPoint could ask for compensation in a regular court procedure, the court ruled.

Based on its examination of the facts the court is “not of the opinion that the country did not commit to obligations towards BearingPoint.” But the company will have to make do with a claim for damages. The court notes that it is “not unlikely” that the country can be held liable for the profits BearingPoint has missed due to the “abruptly aborted negotiations” about the ICT-project.

In June 2017 the tax inspectorate tendered an integrated ICT-system for the tax administration inclusive the related ICT-services through a request for proposal. In November 2018 BearingPoint won the tender. On March 19, 2019, Minister of Finance Perry Geerlings presented the tax transformation plan in the Council of Ministers, in which he asked approval for executing the ICT-contact with BearingPoint.

The Council of Ministers approved the plan and gave Geerlings the mandate to act as the principal on behalf of the government. On November 18, 2019, Wilgo Lieveld, then the director of the cabinet of the minister of finance, informed BearingPoint that there was consensus about all contract-conditions and that the ministry was looking forward to “the urgent signing of the agreements.”

It never happened, because the government fell and Ardwell Irion succeeded Geerlings as Minister of Finance. On December 4, 2020, Irion wrote to BearingPoint that St. Maarten was unable to resume negotiations about the project “due to the inability to commit to any multiannual financial obligations.” On February 19, 2021, Irion informed BearingPoint that, by his letter from December 4, the negotiations were “terminated.”

In a footnote of the court ruling, Irion’s actions receive plenty of criticism. “The new minister of finance seems to assume incorrectly in his letters to BearingPoint that existing obligations of the country after a change of government no longer have to be honored because the new government had no interference with the tax-transformation.”

Ironically, while Minister Irion recently issued a press release stating that former ministers should be held liable for their actions, the court writes in a footnote about illegal acts: “Why would tax payers have to pay for a possible claim for damages from BearingPoint if ministers can be blamed to such a serious extent? A minister must also be held accountable through civil law versus the country or third parties.”

To the detriment of BearingPoint, the court found that the ICT-project is only a part of the tax-transformation plan. “The plan of approach states that the transformation is a complex of interrelated components (management, processes, organization, ICT, new building and tax-reform).” It furthermore states that all components have to be executed together and completely. “A partial execution with too small an investment leads to a failed attempt at transformation.”

This was reason enough for the court to deny BearingPoint’s demand for the signing and execution of the ICT-project.