Please allow me to voice my opinion on the turnover tax. In 1996, the turnover tax (ToT) of 3% had been introduced on Sint Maarten. At the time, this measure was already a topic of heavy discussion on the island. Businesses were allowed to state the 3% next to, sometimes up to 15%, service charges on the receipt and or invoice. It was thought that the turnover tax would affect the cost of living (and it did). The idea was to have this tax only implemented temporary. Fifteen years later this tax is not only still in place on the island, but it has even increased to 5%.
That the discussion has been ongoing can be noted by, for example, the notice from the Inspectorate of Taxes in February 2003 that the turnover tax is not a sales tax and can not be charged separately and the proposal by a former commissioner, and leader of the then ruling political party, in May 2010 to have 2% of the collected turnover tax remaining on Sint Maarten and have 1% of the collected turnover tax sent to the federal government of the Netherlands Antilles.
Taking note of the few facts stated above, it is unimaginable that changes to this controversial tax would be made by a government without consulting the social partners and stakeholders. However, within two months after taking office, the current government of Sint Maarten decided to increase the turnover tax to 5%.
On initiative of the labor unions on Sint Maarten a meeting was held between the minister of finance and union representatives in December 2010. The union representatives were informed by the minister of finance why the decision had been taken to increase the turnover tax. On their turn the union representatives informed the minister of finance of their concerns about the spiraling upwards of prices and an increase of the indexation figures. Also in December 2010, a meeting was held between the minister of finance and the president of the local hospitality and trade association, representing close to 150 hospitality and trade companies. And again, this meeting was held on request by the "other party" than the minister of finance. During this meeting the minister of finance informed the representative of the association like he informed the union representatives. The representative of the hospitality and trade companies also stated that he expected an increase in the cost of living. Next to that he stated his concern that costumers would look to do their shopping on other islands as a result of increased prices on Sint Maarten. He also mentioned that the government had the option to choose for a three year transition period.
My opinion is that it shows lots of disrespect and or incompetence towards the social partners and stakeholders not to include them into the decision making concerning the turnover tax. I also believe that it shows incompetence that government has to increase any tax, while it is common known that there is a lack of compliance to tax collection. Government should first clean their own house before looking for revenues outdoors. I do have to agree with the unions and the hospitality and trade companies that we will see (and are seeing) an increase in the cost of living, because of this decision, and that it will not only force customers to other islands for their shopping, but also that it will make investors think twice to invest on an island where the returns are getting lower and lower and that it looks like there is no proper financial planning on government finances (ad hoc decision making creates uncertainty for the future).
In closing I can say that it is not desirable to increase any tax to increase revenues unless other possibilities have been looked at and social partners and stakeholders have been consulted. First, one has to look at cost cutting measures. Efficiency of executing government tasks is number one in this field. Second, I can repeat myself in stating that government should look for existing possibilities to increase revenues by enforcing the law on tax collection. Lowering returns and an unstable investment climate will harm the local economy. I am also in favor of a diversity of education which should lead to diversity in the economy. Turnover tax should be abolished and could be replaced by, for example, a value added tax (VAT). The last two statements however, are subjects by their selves and I will come back on that.
Have a great day,
Sjaoel "Shooz" Richardson
