The campaign debate on fiscal reform continued as the United St. Maarten Party (US Party) noted that the National Alliance (NA) manifesto includes a shift towards indirect taxation, while Finance Minister and candidate on the NA-list Richard Gibson had said it would not happen on his watch.
The two parties are currently coalition partners, but that doesn’t seem to matter much once elections are less than two weeks away.
The Minister replied by saying that he is a proponent of lower taxes, more indirect taxes and broadening the tax-base. His earlier statement regarded a complete switch to indirect taxes or a flat tax to replace the entire current system.
It’s true that income tax is progressive in the sense that people who earn more pay a higher percentage, which is, of course, not the case with, for example, a value added tax (VAT). When it comes to the latter, however, the more one spends the more one obviously pays.
In addition, it is possible to charge different rates for normal products and services compared to what are considered luxury products like pleasure craft or very expensive vehicles, so those who want a wealthy lifestyle can still be fiscally penalised for making such purchases. This means a shift to less direct and more indirect taxes won’t necessarily benefit only the rich.
Still, maintaining a healthy mix of the two would seem to make sense, also because mechanisms to, for example, effectively control sales are lacking and will require considerable investment. In that sense it’s probably best not to throw the proverbial baby out with the bathwater.
