Collecting more taxes does not require reform; it requires enforcement
PHILIPSBURG — Tax reform. Tax compliance. Tax evasion. Tax fraud. These are all well-known terms in St. Maarten where fooling the tax inspectorate is seen by quite some citizens and companies as a national sport. According to some experts, compliance stands at 30 or maybe 35 percent, meaning that the majority of those who ought to be tax payers are not paying anything at all.
Ralph Cantave recently interviewed tax attorney Quincy Lont about St. Maarten’s tax system on his radio broadcast The News Behind the News. One of the more noteworthy statements from that interview indicate that there is no need to reform the tax system to generate more revenue for the country.
“Go for enforcement,” Lont suggested. “Find a way to indentify all players and give them a CRIB-number. Then you will see an increase in tax revenue. You don’t have to change the tax system for that.”
How difficult can that be? Rather than publishing seemingly pointless tax warrants in the National Gazette, tax inspectors could spend their time by checking in the public and the private sector whether employees have a CRIB number and whether they are filing their tax returns every year. Begin with the civil service – there you have already around 2,000 potential tax payers.
While Lont agreed that it is time to modernize the tax system, he does not see this as the way towards better compliance. Tax legislation without enforcement does not make a lot of sense.
If memory serves us right, the maximum speed on the Walter Nisbeth Road that runs from the casino near the Prince Bernhard Bridge towards the roundabout near the police station, is 30 kilometers. A traffic sign near the casino makes that clear. But does anybody ever pay attention to that rule? Does the police ever execute speed controls? Of course not. And without enforcement everybody is doing whatever.
As long as the tax inspectorate does not spring into action beyond issuing warrants, tax dodgers are having the time of their life in St. Maarten.
Quincy Lont will be forgiven for emphasizing the importance of his profession but he had a point when he said that businesses and residents will benefit from solid advice. After all, the idea is that everybody pays his or her fair share, but misunderstanding the complex rules and therefore paying too much is a real possibility.
Lont pointed out for instance that tax residents of St. Maarten are liable for taxes in St. Maarten on their world-wide income. Working on the French side of the island does not set St. Maarteners free from paying taxes on the Dutch side. Fortunately, there are exceptions to a lot of rules that could benefit tax payers, but knowing them and applying them correctly are two different things. Not everybody is adept at wrestling through a truckload of tax legislation.
Lont advises people who are about to engage in major financial transactions to discuss their situation with the tax inspectorate. “Talk to the tax office and convince them that, based on case law, what you want to do is correct. Avoid litigation, because that is a lengthy process and it is expensive. During the last two to three years I have not been involved in any court cases.”
Making the wrong decisions can be costly, also because the tax inspectorate does not audit all companies every year. Controls come at least several years after the fact. And, as Lont pointed out, the auditors come to find mistakes.
Attorney Cor Merx, a former Chief Prosecutor, told StMaartenNews.com that during his tenure he has never prosecuted anyone for tax-related issues. “Former prosecutor Johan de Vrieze began with prosecuting tax-issues back in 2005. Marcel Loor was the first one to be prosecuted for this reason.”
Merx notes that judges are rather reluctant to sentence people, and in particular politicians, for tax offenses. Former parliamentarian Chanel Brownbill was not that lucky. But according to Merx he was sentenced because the court wanted to set an example.
One of the bones of contention is when the public prosecutor can drag someone to court for tax offenses and when handling such matters should be left to the tax inspectorate. Merx is of the opinion that prosecutors ought to tread carefully. A conviction for a simple tax offense results in a criminal record and that makes, for instance, travel to the United States impossible.
“Corruption has to stop, but the public prosecutor is incorrectly using tax offenses to fight corruption,” Merx says.
The best way to avoid this kind of trouble is to talk to the tax inspectorate, rather than running away from it. Citizens or companies that have a good reason, or a good story, can attempt to find middle ground with the tax inspectorate; for instance by making an agreement about payment of tax-arrears in installments.
Tax legislation also offers the option to file an appeal against a tax assessment. Detailed information about this topic can be found in the Grant Thornton publication Fiscale Wetgeving 2021. It contains a complete overview of relevant legislation for St. Maarten, Curacao, Aruba and the BES-islands. It can be found at: https://www.grantthornton.com.cw/contentassets/f176398d5f15496681c6cd585df17226/wetboek-2021_march2021.pdf.
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Ralph Cantave’s Interview with tax consultant Quincy Lont on Youtube
