The idea of a 7.5% tax on online purchases is still alive and well (see related story). Both the International Monetary Fund (IMF) and “Spurring Entrepreneurship” report back such a move.
One of the arguments is that firms and consumers engaged in this type of “direct trade” evade turnover tax (TOT). It also promotes parallel import and creates an unlevel playing field with established local companies fully meeting their fiscal responsibilities.
Not everyone will agree, but if the tax base must be broadened that is one way to do so without having a huge detrimental socioeconomic impact. Others include higher excise levies or TOT on tobacco products and alcoholic beverages, higher property transfer fees as well as revenue-sharing arrangements with Airbnb and other short-term rental services.
What should in any case not be entertained under the present conditions is the introduction of any new major taxes or substantial hikes. Significantly increasing the cost of living and doing business even more with current prices going up sharply is obviously ill-advised at this point.
As reported in today’s issue, Aruba chose not to implement a value added tax (VAT) of 6-14% effective January 1 next year because this could worsen already raging inflation. The Dutch Caribbean country took that decision even though the measure is mentioned in the “country package” negotiated with the Netherlands as requirement for COVID-19 crisis-related liquidity support. Instead, the island’s current BBO turnover tax will be raised by 1-1.5% to still meet budgetary targets.
That’s the kind of pragmatic approach needed in these unusually challenging circumstances rather than sticking to dogmas and preconceived notions or blindly jumping into unknown adventures of which the consequences remain unclear. Especially in times of great uncertainty, it’s best not to upset the applecart.
