Published On: Fri, Mar 27th, 2020

Private sector pleads with government for short-term rescue package

Philipsburg at Night - Photo provided by LNWAD

PHILIPSBURG – Private sector organizations and labor union WIFOL applaud the government’s initiative to project support for the next twelve months but they plead at the same time for a short-term rescue package for the next six months in an attempt to weather the economic downturn caused by the corona-virus.

This appears from a press release issued by the St. Maarten Hospitality and Trade Association (SHTA), on behalf of the Marine Trades Association (SMMTA), the Timeshare Association (SMTA), the Indian Merchant Association (IMA) and the WIFOL. These organizations have chosen the SHTA to speak on their behalf “for continued representation and information.”

The press release states that the average monthly wage-bill for St. Maarten is 62.5 million guilders. A 90 percent payroll subsidy for six months would amount to almost 340 million guilders or around $190 million. The calculation is based on data from the 2018 Labor Force Survey, the 2018 Business Census and the 2019 World Bank Trust Fund Report.

“All stakeholders express concern about the social aspects of the economic downturn. Increased unemployment leads to decreased income, lack of household necessities and hence an incentive for an increase in crime,” the organizations say.

Collectively, the private sector associations represent 70 percent of the employed labor force on the island. “These associations contribute the most to the government coffers, via employee paid wage tax, business paid turnover tax, room tax and profit tax,” the press release states.

On March 19, the organizations presented a proposal to the government that outlines the desired support-package for the private sector. Its key-elements are a 90 percent payroll subsidy for all employers and a reduction of the turnover tax from 5 to zero percent.

The payroll subsidy should not only apply to the private sector but also to the government and to nongovernmental organizations (NGOs). This way, the press release states, “wage tax revenue will continue to make large contributions to the funds needed to run the government. Payroll expenses are by far the largest single business expense across all industries. When these liabilities cannot be met they have the single biggest socio-economic impact; people lose jobs and companies irreversibly close.”

The (temporary) elimination of the turnover tax will stimulate local economic activity, the press release states, adding that funds will circulate longer on the island and that it will help reducing foreign reserve risk.

Furthermore, the press release states that zero turnover tax will have “a deflationary effect on the cost of living as prices will go down by the tax percentage.” The organizations consider this a good opportunity “to restructure this tax to be less destructive on our supply chain and the multiplier effect on the cost of goods.”

The associations ask the government to include them in their deliberations “so that we can add value towards developing solutions.”

A private sector survey among the business community is currently underway as a tool to support research conducted by the ministry of finance. It can be found at shta.com/survey-covid.19.

Photo caption: Philipsburg at Night. Photo provided by LNWAD.