Published On: Thu, Nov 1st, 2018

Turnover Tax will soon become a curiosity

StMaartenNews LettersDear Sir,

The report in your newspaper on tax reform discussions in parliament indicated that the view of the present government is to stick to the Turnover Tax model and to avoid working in the direction of a value added tax (VAT or dutch BTW).

The history if tax policy in Sint Maarten reflects a consistent approach of plugging revenue holes in the short term rather than long term planning . It is in the country’s interest to change this. Our parliament has control over this.

Whilst turnover tax has the advantage of simplicity for all to see, it hides the negative economic impact as a result of being applied cumulatively as domestic (within the country) trade is exercised. It is not surprising that it’s use internationally is becoming less and less. Soon it will become a curiosity (but not one that will attract tourists!)

The apparent complexity of value added tax and the fear inspiring high initial percentage should not shock our legislators if they have immersed themselves in tax models and their economic impact. If our legislators have a perspective of future development models for Sint Maarten that include it being a trading hub they should be fully aware of the contradiction between this tax policy and the vision of a trading hub. Even the existing employment that is dependent on in country trading will be threatened by an indirect taxation system that makes us less competitive.

Ironically much of our growth was initially driven by our advantageous taxation system whilst our many nearby neighbors were impacted by outdated tax systems. In the meantime our neighbors have redesigned their taxation substantially and a major portion involves a Value Added taxation and a reduction of direct taxes. In many respects they are moving further and faster in optimizing their public finances.

Tax is not just about paying for government expenses in any way that is possible. The manner in which it is collected defines a great deal of economic behavior and the economic and social position of the country in the long term. It deserves more attention in Sint Maarten.

Robbie Ferron