Editorial: Tax compliance

POSTED: 07/11/13 12:30 PM

Finance Minister Maarten Hassink must put the fear of God in the (estimated) 65 percent of the population that does not pay taxes the way it should. Tax compliance is, as the minister said drily, his favorite subject. It is, of course, about time, somebody woke up to the idea that tax compliance is useless as coffee table talk: it requires action.

The thing is: many politicians have talked about this, but who are the ones that really did something about it? The late chairman of the board for financial supervision Hans Weitenberg stated a couple of years ago that tax compliance in St. Maarten is somewhere between 30 and 35 percent.  Nice wakeup call, we thought.

Weitenberg thought that St. Maarten could easily collect twice as much tax as it actually does. Hassink somehow doubts that, but he is well aware that there is plenty of room for improvement in this department.

For a government that struggles with its budget year after year – maybe decade after decade is a better expression – it is amazing that there is an apparent unwillingness to tackle this issue.

Politicians – those in parliament – make a habit of complaining about businesses that fail to pay their taxes. But how many of them have come up with practical ideas to change the situation? Words like zip and zero easily come to mind.

Of course, there have been attempts. Remember the condo tax of former Finance Minister Hiro Shigemoto? It was a desperate attempt to single out a group that would not cost any votes in any future election (foreigners), but this scheme did not even generate one percent of the 21 million guilders it was supposed to bring into the treasury. Politicians meekly swallowed the budget and pretended that all was well.

Our next Finance Minister, Roland Tuitt came up with a couple of other ideas to haul in more tax revenue: higher taxes on alcohol and tobacco (done within reason, we have absolutely no problem with the concept) and getting money from those darn casinos.

Again, with a few exceptions, the parliament swallowed the proposals, conveniently forgetting (or ignoring) that the projected revenue was not realistic because changing tax tariffs requires legislation. That legislation still is not there and maybe it will never see the light of day.

Our third Finance Minister since 10-10-10, Maarten Hassink, has taken the alcohol and tobacco tax increase off the table. One could wonder if it ever really was on the table. The companies that make their livelihood from selling smokes and drinks must be happy that the plan failed. But in the meantime, the country is still thirsting for tax revenue.

Will this come from the casinos? Certainly, not all of it. But that our gaming houses ought to pony up – paying their fair share – is something few will have a problem with.

Minister Hassink is focusing on the retail sector. That is where a lot of cash is going around and that is also where he suspects to find the largest tax-leaks. A visit to Curacao revealed that retailers there [pay maybe 35 percent of the taxes they really owe.

The answer is there: electronic cash registers that will prevent retailers from cheating. Will that work? In part, absolutely. But there will always be options for retailers to sell something straight over the counter without putting it on the till. It is the nature of the beast, so electronic cash registers will not bring all retailers to heel.

What the ministry ought to do is develop industry standards: they will indicate what certain stores of a certain size that sell certain goods in a certain market realize on average in turnover. Deviation from that average is possible, of course, but when those deviations cross certain limits chances are that somebody is cheating. That will set off alarms at the tax office and that will then in turn be a reason to do a thorough investigation that should result in correct tax assessments.

 

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