Finance Minister Richardson Gibson says the current turnover tax (ToT) is disruptive and impedes economic growth. For example, a product that goes through an importer, distributor,
wholesaler and retailer ends up being subjected to the 5 per cent levy four times.
Of course, some companies, particularly in the food industry, have adapted by concentrating different activities under one single entity. However, there can be little doubt the cumulative nature of this tax helps drive up consumer prices, which may partly answer the frequently-asked question how the cost of living in St. Maarten could be higher than in other countries with import duties.
On the other hand, collecting the ToT is a relatively straightforward process. A sales tax such as the OB of Curaçao requires sealed cash registers and printers to be applied effectively, while a value-added tax (VAT) as suggested by the International Monetary Fund (IMF) apparently would produce significantly lower revenue.
There are also issues with the profit tax, which is very human-resource-intensive, according to the minister, and the country does not have so much manpower available. That’s certainly a major aspect especially where it regards enforcement and control, because some of the work done here by Curaçao’s tax accountant bureau BAB in the recent past wasn’t exactly stellar either.
Unfortunately, the impression exists than many local businesses hide their substantial earnings and claim a breakeven or small positive result to evade profit tax. There is even a running joke that those reporting a profit “must have a bad accountant.”
So, viable alternatives less easy to circumvent and thus more efficient are therefore welcome, although probably not so simple to devise and implement. In the meantime, working on a change of mentality particularly within the private sector remains just as important.
Nobody likes paying taxes, it is often stated, but that’s a rather narrow-minded and short-sighted view of things. To the contrary, if everyone duly complied with their fiscal duties this would eliminate the need to constantly look for more income-raising measures and would make it better for the entire community.
In fact, if civil society is to function properly, all involved must do their rightful part in an honest and fair way. Compliance too is a matter of integrity.
