State secretary of Finance Weekers lived up to his promise to come with proposals to improve the BES tax laws for the islands St. Eustatius, Saba and Bonaire.
In a letter sent to the three Executive Councils of which the Chamber of Commerce received a copy he acknowledged that the anticipated positive effects of the introduction of the BES tax laws have not materialized. He therefore has come with short term proposals to alleviate the tax burden awaiting a more in debt study into the effect of the laws.
He explained that the intention of the new tax laws was to create a simpler system than the old Antillean tax laws and that it was also the intention that the laws would stimulate economic activities. He is of the opinion that this still is supposed to be the case. He did acknowledge that signals coming from the islands, from citizens and business sector alike, are to the contrary. The shift from direct to indirect taxation is not having the effect it was intended to have. The actual reduction in the income and wage tax does not compensate for the increase in indirect taxes such as ABB, leaving in many instances the tax payer with a reduced spending power.
In his letter the state secretary did stress however that the total tax revenue under the old Antillean tax system should also be collected under the new system. In the event, as felt by many, that the BES fiscal system will result in substantial more revenues, tariffs will be adjusted downwards.
Weekers also explained to be a proponent for an interdepartmental study into the economic situation, the causes of the, in most cases, steep price increases and the spending power on the three islands. Pending this study he is proposing a number of measures meant as quick wins to relief the tax burden. These measures can already be introduced as early as October 1st this year.
He stated he will take a critical look at the practical implementation of the tax laws by the tax inspection and customs departments and make the procedures at the ports less cumbersome for businesses.
He has already started negotiations with the government of St. Maarten to find a solution for the double taxation caused by the turnover tax being charged to companies on Statia and Saba.
The measures the state secretary is proposing to reduce the tax burden in the short term are:
– The effects of accumulation of ABB in the restaurant sector will be reduced by bringing down the percentage from 6 to 4 percent for this sector.
– In the construction sector contractors building new buildings have the right to deduct already paid ABB by import of materials. In case of renovation or maintenance his proposal is that by projects of US $ 100,000 or more the same rule applies.
– Presently when shopping in St. Maarten only US $ 175 is free of taxation. His proposal is to raise this amount to US $ 500 for persons older than 15 years. For younger persons the tax free amount is to be raised from US 50 to US $ 150.
– The single tariff of 25% ABB on cars will be replaced by a multiple tariff system. 18% will be charged on the first US $ 18,000, 22% on the amount between US $ 18,000 and US $ 30,000 and 30% on the amount above US $ 30,000.
– The inflation recently measured by CBS, averaging 4.1% for the three BES islands, will be corrected on October 1st this year instead of on January 1st 2011. Through this measure the tax free threshold will increase as well as the senior and child deductions.
– To compensate the decrease in net income of seniors the senior deduction will increase from US $ 200 to US $ 1200.
– The customary wages for directors/owners of NVs will be lowered from US $ 20,000 to US $ 14,000.
Mr. Weekers still feels that these measures somehow need to be compensated. Therefore he proposes that the top tariff of 35.4% in the income tax will be paid on all income above US $ 100,000. This is presently US $ 250,000.
Furthermore he wants to increase the tax on dividend from 5% to 15%.
It is noticed that the state secretary does not mention anything with regard to the property tax.
In a first comment, Mr. Sneek stated that he noticed that a number of proposals made by the Chamber in June have been taken over by the state secretary in some fashion or the other. In the coming weeks the Chamber of Commerce will study the proposals and will discuss the matter with the other private sector organizations and stakeholders on both Saba and Statia in order to come as much as possible with a unified reply to the proposals. Weekers is expecting comments no later than July 29th.