12 May 2017
PHILIPSBURG–St. Maarten Hospitality and Trade Association (SHTA) is not amused by Government’s plans to increase room and other taxes, even though Finance Minister Richard Gibson Sr. has called it a pending indexation of the existing taxes.
SHTA said in a press statement that it has taken note of Gibson Sr.’s increasing car rental, hotel and timeshare occupancy taxes.
The example of Aruba is mentioned and it is stated that “Aruba takes 23.5 per cent from every hotel guest bill,” creating the perception that Country Aruba receives 23.5 per cent in direct or at least comparable taxes to Occupancy Tax. Unfortunately, this is far from the truth.
Aruba levies 9.5 per cent in occupancy tax with some exceptions for all-inclusive and timeshare properties (in order to fix differences). The big difference between Aruba and St. Maarten is that only about 20 per cent of the Occupancy Tax revenue ends up in government coffers, the bulk goes directly to the Aruba Tourism Authority (80 per cent) for marketing. It is perhaps good to mention that the Aruba hospitality industry agreed to an increase in the Occupancy Tax (from the then level of 5 per cent) upon establishing the Aruba Tourism Authority (ATA). Something SHTA has been fighting for, for many years.
In addition, the hospitality industry is willing to cooperate with such an increase in Occupancy Tax if similar conditions as in Aruba would be created in St. Maarten, said SHTA. “The wisdom of going that route is clearly reflected in the performance of Aruba’s tourism product. There is no way the increase in our occupancy taxes will lead to better performance by our tourism sector. It is doubtful it will result in the additional revenues the Minister of Finance is hoping for – quite the contrary. If we raise our taxes, our competition will most likely benefit, as it will decrease our competitive position.”
A shift of car rental business to the French side can be expected, said the Association. “Talking about car rental tax, there is currently a system of double taxation as the Turnover Tax does not include an exemption similar to the exemption for revenue over which Occupancy Tax has been paid.”
Hotels on St. Maarten pay five per cent in occupancy tax. The only major marketing effort done in 2016 was the Expedia/TripAdvisor campaign. Government marketing funds were matched, in side by side campaigns by the participating properties, which goes to show you the industry’s willingness to contribute more (but only under the right circumstances), said SHTA.
“More importantly, the marketing effort was successful, yielding many times the tax revenue (in Occupancy, Car Rental, Turnover, Wage and other taxes). That result is significantly better than increasing the Occupancy Tax to 10 per cent (and not spending additional funds on marketing).”
The key to increase government revenue is through sensible business practices, said SHTA. “This can be achieved by giving private sector stakeholders a leading role in marketing the island, when done properly this will increase revenues and government income. This would boost our economy. It would increase the pie rather than increasing Government’s piece of the same pie.”
“Arbitrarily raising taxes again without properly accounting for expenditure and ensuring investments in sustainability and marketing will only cause an increase in prices, which will lead to a decrease in revenue and economic activity. That is something our economy can ill afford at this time,” said SHTA.
Source: The Daily Herald, St. Maarten