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By: Clifford A E Illis
Terrance Rey’s proposal in St. Maarten News—granting a three-year tax and administrative holiday for 100% locally owned startups—presents a logical economic strategy, its real-world implementation faces severe political and structural roadblocks on Sint Maarten.
The primary obstacle is not economic theory, but the political economy of the island. A policy designed to nurture local, bottom-up enterprise directly conflicts with a entrenched political system built around top-down foreign capital, patronage, and rent-seeking.
1. The Asymmetry of Political Capital: Local Startups vs. Foreign Investors
No Rent-Seeking Value in Micro-Enterprise: Local micro-entrepreneurs (bakers, tech developers, small consultants, artisans) generate distributed, long-term economic resilience. However, they do not offer immediate political payoffs. They do not fund large campaign apparatuses, nor do they offer lucrative board seats, consultancy retainers, or facilitating fees.
The “Ribbon-Cutting” Bias: Foreign direct investment (FDI)—such as mega-resorts, casinos, or marina developments—provides politicians with high-visibility PR victories, grand announcements, and massive upfront capital flows. Foreign developments create concentrated points of leverage where political gatekeeping (permits, zoning changes, tax concessions) can be monetized. Local startup growth offers no such centralized leverage.
2. Institutionalized Inequality in Tax Policy
Tax Holidays for the Capital-Rich, Full Tax Strain for Locals: Sint Maarten’s economic history is rife with double standards. Large foreign developers routinely negotiate custom tax holidays, land lease concessions, and import duty waivers under the guise of “economic development.”
The Local Burden: Meanwhile, a local resident trying to open a small business faces immediate Turnover Tax (TOT) on gross revenue from day one—regardless of whether the business is profitable—alongside non-refundable business license fees, director’s license fees, and notary costs. Giving locals a 3-year growth period would expose this systemic hypocrisy, making it harder for politicians to justify granting multi-million-dollar tax carve-outs exclusively to foreign corporations.
3. Bureaucracy as a Tool of Patronage and Gatekeeping
Licensing as Control: The administrative obstacle course (director licenses, economic licenses, Chamber registrations) isn’t just inefficient; it serves a political function. Discretionary power over licenses gives politicians and political appointees direct influence over who can and cannot operate in the market.
Fear of Short-Term Revenue Loss: Because Sint Maarten’s tax collection system relies heavily on indirect, easily collected consumption taxes like the Turnover Tax (TOT), the Ministry of Finance is perpetually risk-averse. Politicians are reluctant to grant a 3-year tax suspension for startups because they prioritize immediate fiscal cash flow to fund government payroll over long-term tax base expansion.
4. Risk of Exploitation & Structural Loophole Resistance
The “Fronting” Risk: In a political environment with weak regulatory enforcement, a local tax holiday risks being exploited. Foreign entities or established local elites could easily set up local “straw man” corporations to cycle through three-year tax-free periods continuously, resetting the clock under new local figureheads.
Lack of Political Will to Enforce Safeguards: Preventing such abuse requires robust auditing and transparent beneficial ownership registries—mechanisms that the political establishment has historically hesitated to enforce effectively, as transparency directly threatens hidden financial interests.
Summary
The proposal to give local startups a 3-year growth period is economically sound, but politically disruptive. It asks a political class accustomed to extracting rents from foreign capital and relying on immediate TOT revenue to shift toward a model of patient, domestic wealth creation. Until local entrepreneurs represent a organized political constituency strong enough to challenge the foreign-investor-first model, policies like the Startup Growth Period will face silent resistance from the very institutions needed to pass them.
Related article: https://stmaartennews.com/business/beyond-start-smart-give-local-startups-a-three-year-startup-growth-period/
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