At the recent handling of the draft 2016 “shotgun” budget in the Central Committee of Parliament, Finance Minister Richardson Gibson called the turnover tax (ToT) “disruptive” and an “impediment to
economic growth” due to its “multiplier effect.” Opposition member Tamara Leonard (UP) spoke of diminishing yields despite the tax-rate hike from three to five per cent five years ago, according to the Minister partly because that prompted more cheating and parallel imports.
A few days later the St. Maarten Hospitality and Trade Association (SHTA) stated, “Finally, we get confirmation that the ‘temporary’ increase of the ToT (as of February 11, 2011) from three per cent to five per cent actually resulted in a detriment to the coffers of the country and resulted in a contraction of the island’s economy.”
However, on May 31, 2012, then-Finance Minister Roland Tuitt said that during the first four months of that year NAf. 19 million more in ToT had been collected than expected. A total of NAf. 123,304,752 had been budgeted for the entire 2012. Information added to the draft 2016 budget indicates that NAf. 139,864,790 was collected in 2014; obviously up from in any case the forecast amount of two years before.
For 2015 the ToT revenues were budgeted at NAf. 148,500,000, but based on the collection last year the figure has been reduced by 4.26 per cent (NAf. 6,332,000) to NAf. 142,168 for 2016. Mind you, this is still significantly more than was collected in 2014.
The idea here is not to defend the ToT or other taxes. After all, the current profit tax during the same parliamentary meeting also was called too “human resources intensive,” making it tough to enforce.
Few will argue with the latter, but to eliminate or lower these taxes means the income lost must be compensated somehow, certainly under the present financial circumstances. The Minister himself mentioned that, for example, a value-added tax (VAT) as suggested by the International Monetary Fund (IMF) and the World Bank would generate less money than the ToT.
He is no doubt correct in his other assertion: that fiscal compliance, or rather the lack thereof, is the main problem. The immediate focus thus rightfully should be on making everybody pay their fair share, before tinkering with a tax system and risking negative consequences for those who actually do.
