Concerns voiced in Monday’s Parliament meeting about the intention to introduce a 12.5 per cent value added tax (VAT) are justified. St. Maarten Hospitality and Trade Association (SHTA), the Dutch side’s biggest employers’ representative, had already expressed reservations at the beginning of February.
This planned step to raise government revenues is part of the so-called “country package” with restructuring measures as condition for continued coronavirus-related liquidity support from the Netherlands. Their execution will be overseen by a Caribbean Body for Reform and Development COHO established via Kingdom Act.
The document cites a shift from direct to indirect taxes. However, there is no word of reducing wage, income and/or profit taxes.
It mentions as well that implementing the VAT needs to consider the open border with the French side that has a four-per-cent general turnover tax (TOT) of its own, but without offering any solution. As St. Maarten’s TOT is five per cent, one would be inclined to say that the current situation is better synchronised.
But if the VAT must be realised, it should at least replace the TOT rather than come on top of such. Clarity is also called for regarding its cumulative effect, which is one of the biggest complaints about the TOT.
When three separate businesses are involved in importing, distributing (wholesaling) and retailing a product, in most cases they each pay five per cent TOT and calculate it into their prices. The term “added value” would seem to suggest this will be the same for the 12.5 per cent VAT.
Fiscal reform is one thing, but possibly more than doubling the added cost of consumer goods in the middle of an unprecedented socioeconomic crisis quite another.
