Real estate tax advice

Dear Editor,

  I would like to take this opportunity to respectfully comment on an article I read in The Daily Herald on August 31, 2021, related to a presentation given by the Honorable Minister of Finance Mr. Irion to the Parliament of St. Maarten about Tax Reform.

  I am pleased to see some consideration being given to not wanting to impose a real estate tax on residents of the island. This being said, many residents of the island currently own property on government long lease land, and there should be some major concerns with how these fees and rates are going to impact the local population in the coming years when many of those leases will be up for renewal, but this was not part of the Minister’s presentation to Parliament so I will leave this as a topic for another day.

  With regard to the suggestion of introducing real estate taxes on non-residents who purchase property on this island, I have several questions and comments. First things first, we run the risk of severely damaging our reputation as a trustworthy country to invest in, if we are telling investors that we have no property taxes today, but then a few months/years later we turn around and tell them a different story. Non-residents who have already invested on this island should be “grandfathered in” to the tax laws the way they were when they originally purchased their property.

  By making sure non-residents who have already invested on this island are protected when the new legislation comes into effect we will gain confidence and credibility as a safe destination to invest in. It might take a few years to build up the tax revenue stream from non-residents, but in the long run this type of responsible approach will keep the real estate market stronger for decades to come. Announcing now that non-residents who purchase property before the new tax laws are implemented will be exempted from this tax in the future will help stimulate the local economy almost immediately.

  Non-residents who purchase vacation condos or homes on our island are by far the most valuable and important tourism demographic of our one-pillar economy. They invest hundreds of thousands of dollars, sometimes even millions into our local economy. Their interest drives the real estate market and stimulates development, which in turn fuels the growth of the local economy. Many non-residents who own property here invest their time and money promoting St. Maarten, when they visit the island they support countless local businesses, and in times of crises they are the first ones to return to the island.

  It was very disappointing to read in the article that non-residents who own property on this island were referred to as “those who do not contribute anything.” You never miss the water until the well runs dry. Government needs to appreciate the value of this demographic and if we are going to start taxing them, please let’s make sure we don’t chase them away in the process!

  A few important questions:

  * What kind of tax rate is being proposed for non-residents who purchase property on our island?

  * What percentage of properties on the island is owned by residents vs. non-residents?

  * How many real estate transactions happen annually on the island from residents vs. non-residents? Does the minister expect this number to increase, decrease, or stay the same as a result of introducing a tax on non-residents?

  * How much money is government projecting to receive annually by introducing real estate taxes on non-residents?

  * Are the projected funds from real estate taxes earmarked for anything specific?

  * How much money is currently collected from transfer tax annually, and why would you want to eliminate this tax, which is very easy and cost-effective for government to collect?

  * Why was the government unable to make a deal with Airbnb?

  * If a non-resident purchases property for personal use, will they be taxed at the same rate as a non-resident who is doing rentals? What about a non-resident who owns a property used for commercial purposes? Will residents be exempt from tax on vacation rental income?

  * How will the real estate tax laws be enforced? What will happen to people who don’t declare or don’t pay? Will there be user-friendly technology implemented for easy payments of this real estate tax?

  * With all due respect to IMF’s FAD, I’m sure they have some very smart and qualified people, but why have no local stakeholders from the real estate sector been contacted about this idea of taxing non-residents?

  Thank you for taking the time to read my thoughts on this matter. I hope someone from the minister’s office can publicly answer these questions.

Arun Jagtiani

Founder/Owner/Broker

Island Real Estate Team