Turnover tax’s future uncertain Government preparing to shift to indirect taxes

POSTED: 02/28/12 1:27 PM

St. Maarten – Finance Minister Hiro Shigemoto believes it is too premature to say whether turnover tax will disappear completely from the country’s tax regime. He said this in written answers to questions in parliament about his overall plans to introduce a new tax system.

“To stimulate economic growth, a shift must be made from direct taxes to indirect taxes. Given the importance of the indirect tax in the new tax structure and its impact on the economy of St. Maarten a study is being conducted to see whether the TOT should be reformed or that a new indirect tax system should be  introduced. At this stage, it is too premature to say how the 5% TOT will be replaced by a new tax system,” Shigemoto said.

The revamps of the tax system is being led by the Working Group Tax Reform. The group is assessing all elements of the system taken over from the Netherlands Antilles, which has consistently been labeled complicated, having a narrow tax base and relatively high direct taxes like wage tax, income tax and profit tax.

“My objective is to introduce a new tax system which is simple, fair and efficient, whilst (more) revenue for the government of St. Maarten is guaranteed and economic growth on St. Maarten will not be limited,” Shigemoto states in the answers.

The working group has already consulted the Central Bank of Curacao and St. Maarten, the St. Maarten Hospitality and Trade Association, the Chamber of Commerce, the Foundation Tax Committee, the Windward Islands Civil Servants and Private Sector Union/Private Sector Union and the Workers Institute for Organized Labor on a variety of tax models that have been assessing. Their review includes data collection and processing and calculating the financial/economic impact of certain policies.

Shigemoto reports that the stakeholders have expressed support for the reform’s broad principles of simplifying the system and broadening the tax base so that tax rates can be reduced as much as possible in the long term. Based on this he expects that a draft of the new system will be presented to the Council of Ministers for approval “within a couple of months” so that Shigemoto can meet the objective of having the system in place by the beginning of 2013.

The working group also plans to meet tax authorities on the French Side regularly to strengthen cooperation on tax policy and tax enforcement. This is aimed at ensuring that people and businesses fleeing either side to business on the other.

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