Aruba is introducing a crisis levy of 2.5 per cent (see related story) that will raise its turnover tax to 6 per cent. In addition, the gasoline excise tax is being increased by two Aruba-florin cents per litre to produce an additional Afl. 10 million per year.
The austerity measures are needed due to unsustainable budgets, but the higher cost of doing business resulting from them will no doubt be passed on to the consumer. To mitigate the negative impact for vulnerable groups the special allowance of minimum wage earners is going up, while the AZV health insurance paid by the elderly will be decreased.
Moreover, small entrepreneurs are getting a turnover tax exemption for the first Afl. 12,000 they make. The intention is also to build 1,000 low-income homes of which 200 are destined for social housing.
St. Maarten faces even bigger deficits following the devastating blow dealt to its hospitality industry by Hurricane Irma. How these are to be effectively managed remains unclear at this point.
Reducing personnel expenses is very difficult because of current conditions on the ground, with many in the private sector already losing jobs and income. There will be little financial room for capital investments, although projects to be executed using the reconstruction funds provided by the Netherlands via the World Bank could help fill that void.
What in any case should not be contemplated right now is reducing taxes and consequently fiscal revenues, as suggested by some during the recent election campaign. After all, Government’s income has taken a nosedive as it is.
As stated before, the Dutch Government too needs to understand that balancing the budget under these circumstances is hardly possible and won’t be until the dominant stayover tourism field has sufficiently recovered. That’s the local reality today, but there is no reason to doubt that once its economy is back on track, the country will again be in a better position and able to hold its own.
