Published On: Thu, Dec 20th, 2018

Elsevier bloopers with tax comparison

New Members of Parliament group photo - 20180402 KABGSXM

PHILISPBURG – The Dutch news magazine Elsevier made a serious mistake in an article about the remuneration of parliamentarians in St. Maarten compared to the money Dutch MPs receive. The Antilliaans Dagblad picked up on the story and asked the accountants and tax consultancy Grant Thornton Dutch Caribbean to separate fact from fiction.

Elsevier’s reporter Eric Vrijsen wrote that St. Maarten’s fifteen MPs receive €104,000 ($118,785) per year, their Dutch counterparts get a little bit more: €109,000 ($124,496). So far, so good. But Vrijsen then claimed that the MPs in St. Maarten only pay 20 percent income tax and that St. Maarten does not have a Value Added Tax (VAT) system like the Netherlands. That’s the reason, Vrijsen wrote, that the purchasing power of parliamentarians in St. Maarten beats that of Dutch MPs.

Grant Thornton calculated the fiscal effect in St. Maarten, based on the assumption that parliamentarians on the island indeed earn close to $119,000 per year. The consultancy calculated that MPs pay $5,374 in social premiums. Part of those payments (for old age pension and unemployment) is tax-deductible, thus lowering that taxable income to $113,411. Over that amount, MPs would have to pay $37,151 in income taxes. That brings the total fiscal pressure for this income to $42,525 – or 35.8 percent (Grant Thornton arrives at a slightly higher percentage, based on a calculation in euros: 36.6 percent).

“Elsevier is wrong when it claims that the fiscal pressure is only twenty percent; it is almost twice as high,” the tax consultants conclude in Antilliaans Dagblad.

That St. Maarten does not have a VAT-system is correct. But the island does levy turnover tax; its effect on disposable income differs from the way VAT bites into citizens’ budgets in the Netherlands. Grant Thornton points out that the turnover tax is cumulative.

When a wholesaler sells a $100 product to a retailer, the retailer pays 5 percent turnover tax, bringing the cost of the product to $105. The retailer charges again five percent to private citizens, bringing the total to $110.25.

In the Netherlands the regular VAT-tariff is 21 percent, driving the cost for a $100 product up to $121 for private buyers. But there are also categories that fall in the low VAT-tariff of 6 percent, setting prices for those products and services at $106.

While all these calculations shed a different light on the Elsevier story, the remuneration parliamentarians in St. Maarten have awarded themselves remains high compared to that in the Netherlands.

The cost of a Dutch parliamentarian is $7.32 per 1,000 inhabitants. A member of parliament in St. Maarten is costing the taxpayers $2,897 per 1,000 inhabitants. Seen from that perspective, the island-MPs earn more than 395 times more than their Dutch counterparts.