The new right-wing PVV/VVD/NSC/BBB government in the Netherlands plans to increase the value added tax (VAT) on hotels and other visitor accommodations from 9% to 21% (see Monday newspaper). Ministers reportedly claimed it would produce 1.7 billion euros of which 910 million from the hotels, based on 6.8 billion euros in gross revenue.
However, economists of ABN Amro Bank said that figure includes spending on food, drink, bike rentals and other activities organised by hotels, but not subject to the VAT hike. In addition, 40% of guests are on business trips and their companies can claim it back, leaving only 39% of hotel sales to be impacted, with a real gain of closer to 285 million euros.
The experts also warned that raising the tax so much could drive up room rates, potentially leading to a decrease in bookings and further reducing VAT income and negatively affecting earnings in the hospitality sector. They think it will likely do more harm than good.
The debate is relevant for St. Maarten too, because one often hears that visitors should pay a bigger share of collective burden. Caretaker Finance Minister Marinka Gumbs recently confirmed that a so-called “tourist-tax” proposed by the former government is still on the table, although it will not be included in the 2025 budget before implementation like happened this year, leading to a financial shortfall.
As long as the levy is hassle-free and reasonably modest it shouldn’t have severe detrimental consequences, but holding on to the destination’s competitive position in the travel industry remains paramount. The last thing “The Friendly Island” needs is to price itself out of the market and kill the proverbial goose that lays the golden eggs.
