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Ambitious tax measures in St. Maarten's 2013 draft budget

POSTED: 03/16/13

St. Maarten – Of the 25 million guilders the government had to cut from its draft 2013 budget, 18.5 million has been realized, financial supervisor Cft writes in its positive advice with the adjusted draft budget. This brings the balanced draft budget down from 449 to 431.5 million guilders.

“Ambitious but necessary revenue-increasing measures must altogether generate 60 million of which 40 million has been entered into the draft budget,” the Cft wrote in its advice.

Part of the Cft’s recommendations see to it that St. Maarten puts the announced measures in a timely manner into practice. If that fails, the Cft warns with a reference to articles in the Kingdom law Financial Supervision, “This could in the end lead to an advice to the Kingdom Council of Ministers to give an instruction.”

One of the sectors that will have to contribute is the gaming industry. “An agreement has been made with the casinos in St. Maarten that they must contribute more to the society. Under consideration are a fixed fee per table and per slot machine or a 10 percent levy on payouts,” the advice states.

The draft budget assumes a fixed fee from which the fourteen casinos will contribute 7.5 million guilders to the state coffers. The government is also going to collect 1.8 million in arrears from the casinos.

While the Cft first speaks about an agreement with the casinos, further down in its advice it notes that the government still needs to reach an agreement with these businesses “about the way and the introduction of the measures whereby payment arrears will be collected immediately. An assessment as a lump sum is from a budget-technical point of view preferable, because this is more manageable than a 10 percent levy on payouts. Potential objections from the sector must be dealt with or taken into account in the legislation that is under consideration.”

Measures for increased tax compliance aim to bring in 36 million more in revenue; of this projection, 20 million has been entered into the draft budget. Among the measures are the establishment of a compliance team, the introduction of a sealed cash registration system; the tax inspector gets the authority to impose penalties and the administrative burden for filing tax returns will be eased through the introduction of electronic messaging; fines will be doubled.

All this must result in 8 million guilders more in turnover tax revenue. 11 million extra in wage taxes, and 1 million guilders in profit taxes – a total of 20 million. But the draft budget now opts for a more conservative approach: it contains only 10 million in additional tax revenue.

Higher taxes on alcohol and tobacco must bring in another 27 million guilders a year. The turnover tax for cigarettes goes from 45 to 50 percent, that for alcohol from 17 to 22 percent.

Because the intention is to introduce these taxes per April 1, there will be only 9 months left in the year, setting the potential extra revenue at 20 million. But here the approach is also conservative: the budget projects only 10 million.

“The calculation does not take into account a possible decrease in demand or parallel import via the French side of the island,” the Cft wrote.

The question is at this moment whether the higher tax rate will be in place by the first of April, given the fact that today is March 15 and Finance Minister Tuitt only announced this week that he would submit the budget to the parliament today.

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