Turnover Tax amendments

Non-resident entrepreneurs that deliver (goods) and provide services to resident buyers are deemed to be domiciled (and thus subject to TOT) at the Inspectorate of Taxes. In addition, if the buyer is an entrepreneur, the entrepreneur must account for these purchases and pay 5% tax on them. For Deliveries of goods and provision of services to consumers the non-resident entrepreneur remains subject to tax. The new ordinance does not include the possibility to offset the tax charged on purchases against the tax payable on sales revenues.

Thus meaning that imported goods and services are now subject to Turnover Tax by the company importing them, effectively establishing a 5% import duty for resident companies, resulting in an additional layer of taxation, which heretofore has been undisclosed.

The SHTA is of the opinion that the 5% tax levied on imported goods and services will be passed on in threefold to the consumers thus increasing the cost of living potentially by 15%. In short, this change to the Turnover Tax is not "just" an increase of 67% of the old rate; the total tax rate has more than doubled.

This is economically irresponsible, and the direct result of the rush to resolve a budget crisis without taking into consideration the full consequences of such a measure, nor taking the time required to include social partners in open dialogue about reasonable sustainable changes to tax and economic policy. The SHTA is a proponent of simplifying the tax system and broadening the taxable base, thereby increasing compliance and revenue for government. Merely, imposing a higher tax on the individuals currently complying will not solve the budgetary needs. We strongly believe that by introducing this measure of over taxation, government will further erode its taxable base, its expense to enforce and reduce its projected income thereby still not meeting the needs of its budget. Further we predict it will lead to more resentment from the shrinking base and greater tax avoidance.

The SHTA feels that this policy is the a direct result of lack of true partnership with social peers and is worried about its effect on existing businesses and on, much needed, new investments required to sustain this economy.

This is just one of the articles that have not been properly thought out and we therefore believe that the proposed legislation should be revised in consultation with all social partners and adjusted to safeguard the residents and the economic future of St. Maarten.

We look forward to your swift response on this matter.

Sincerely,