Shigemoto projects 150 million higher tax revenue for 2013

POSTED: 05/18/12 1:39 PM

New tax-system favors residents over non-residents

St. Maarten – The revised tax system is scheduled to be completed by January 2013, outgoing Finance Minister Hiro Shigemoto said at a press conference on Wednesday. The governing accord signed by the National Alliance and the DP with three independent MPs has already announced it intends to speed up the procedures and have the system in place by November 8 – 180 days after it takes office.
Shigemoto did however give a detailed description of the measures that are afoot for taxpayers.
Shigemoto said that the new tax system is a work in progress, aimed at reducing all current direct tax rates, and at increasing the island’s competitiveness. The system will “refocus the economic incidence on taxation on visitors and migrant workers rather than on the local population in a way that will not damage the tourism industry or the wider economy.”

According to Shigemoto, the new system will increase tax revenue “significantly” while it reduces the burden for all residents.
The minister said that the current tax system is “not appropriate for St. Maarten. It is massively complex and creates significant tax evasion and non-compliance.”
Currently annual tax revenue is approximately 378 million guilders ($212.4 million); the new system will generate an additional 149.4 million guilders ($83.9 million) next year, Shigemoto said.
On the downside, Shigemoto announced that the 5 percent turnover tax will remain in place. Alcohol and tobacco will lose their tax free status and become subjected to “an enhanced turnover tax.” Casinos will have to start paying taxes based on the number of slot machines and gaming tables at their establishments.
Shigemoto said that the alternative for replacing the turnover tax with a value added tax would have put a much higher burden on citizens because the rates would have had to be anywhere between 10 and 22 percent.
Residents with income outside of St. Maarten have something to look forward to. Until now, residents are taxed based on their global income. The new tax system proposes to tax residents only on income they earn in St. Maarten.

The taxes on income will go down, effectively putting more money in people’s pockets. The current progressive tax rates – with a top tariff of 43.75 percent – will disappear and be replaced by a new top tariff of just 15 percent. The first 36,000 guilders ($20,225) of income will not be taxed; the next 18,000 guilders ($10,112) is subject to 5 percent, the next tranche of 18,000 guilders is taxed 10 percent; above that the 15 percent tariff applies.
Corporate taxes (now effectively 34,.5 percent will go down to 15 percent, in combination with what Shigemoto described as “a potential choice between tax on profits and a lower tax on turnover for a fixed number of years.”

A potentially controversial proposal is to impose a money transfer tax on non-residents, while residents and businesses with a crib number will be exempt from paying this tax. Currently, the money transfer tax is 1 percent; in the new system, non-residents will pay a higher percentage.
The 30 percent capital gains tax will be abolished; interest on bank balances (currently 25 percent plus a 20 percent island surcharge) goes to 10 percent; for residents with a crib number tax-free accounts will be available and allow tax-free savings up to a certain amount.
Residents and businesses with a crib number will also be exempt from paying taxes on dividends (currently 15 percent plus a 22 percent island surcharge); for non-residents this tax will be 15 percent.
Property rental income will be taxed with 10 percent, timeshare units will be taxed per night and hotels will be taxed via the turnover tax “with potential additional charges.”

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