The review of the Social Economic Council SER on indirect taxation in today’s paper should not go unnoticed. There has been much talk of revamping the local fiscal system to make it more effective.
Internationally the trend is to move away from direct to more indirect taxes. SER says the current model, including the turnover tax TOT, which falls under the latter category, has shortcomings in compliance, extent of coverage and economic impact. What’s more, the TOT of five per cent is also cumulative in nature, which several persons, including Finance Minister Richard Gibson, have called “destructive.”
SER says alternative indirect taxes will demand registering transactions at the ports of entry and advised Government to start doing so. Companies that don’t have a CRIB number to pay tax would not be allowed to have any imports.
This registration should be simple and not unnecessarily burden business activity, the organisation representing the three social partners says. The logistical trading process would not be delayed, as is also said to be the case in other countries.
People probably will agree with the CRIB-number requirement, because that’s something most legitimate businesses already take quite seriously. After all, they can be held liable for dealing with third parties that don’t have one.
The suggestion to start registering the imports first and get an idea of what kind of levy might be needed to replace the TOT is in principle a sensible one. However, indications are that any non-cumulative tax would have to be about three times as high to produce the same income, while a levy on incoming cargo at the airport and harbour probably will be considered import duties in supposedly-duty-free St. Maarten.
And while compliance may be an issue with the turnover tax, this is by all indications even more the case for income and especially profit tax. That’s consequently where the immediate focus probably should be.
