Sint Maarten needs tax reform, they all say, but do we really? Part 2

Sint Maarten needs tax reform, they all say, but do we really? Part 2

18. 08. 20
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Effects of changing a tax structure.

However imbalanced the present structure might seem, changing it means that the existing delicate balance between Government, private sector, investment climate, cost of living, labor market and most importantly the relationship with the French side, will be upset. It is not wise to change so many aspects at the same time, that is per definition unmanageable.

 

As said before, we do not have enough empirical statistical information on the present situation, so it would be suicidal to engage in something new without, really knowing what we have.

Any solutions?

Big name consultants are constantly stressing that our tax compliance level is low, based on comparisons with other countries, to create a sense of urgency. However we don’t have exact figures of who should actually be paying tax, so the compliance percentage means nothing. It’s just a guess. Remember the differences between Chamber and Tax department on active companies and the difference between Bureau of Statistics and Census on number of inhabitants? The systems of all these entities need to cleaned up, synchronized and connected.

Instead of embarking in a big change, let’s fix what we have and gather real information on how our economy really works and how taxation affects it. Please stop shouting let’s change the system, while nobody really knows what that change means.

 

I know we can fix what we have. So, why don’t we want to do that?

Because we don’t dare to ask ourselves the difficult questions, such as:

  • How much money does this country need to provide adequate public service?

  • What is adequate service?

  • What percentage of the Gross Domestic product should Government collect?

  • How can Sint Maarten become or retain an interesting Investment climate?

  • How can we make more tax payers compliant?

  • How can we better enforce existing tax laws?

  • How can we better execute antiquated tax procedures, without changing the basic underlying laws?

It seems easier to focus on something totally new, but that won’t work if we don’t really know how it works now.

There are many low hanging fruits, which we conveniently refuse to pick.

To name a few:

  • Modernize the tax processes and have flexible modern systems to support these processes

  • Create a single citizen view (a “social security number” for citizens and businesses)

  • Coordinate the systems and procedures between Chamber, Economic Affairs, Labor, Immigration, SZV, Tax departments and Census.

This is called VGO, Verbeteren Gegevens Overheid, which means Improve Information of Government.

These low hanging fruits already exist, but it is being denied for personal and political reasons by some. There is more money for everyone in a big bang.

I worked on this project from 2011 to 2014, and Public Service center, Business License System (BLIS) and Online Taxes are some of the results thereof. That process has constantly been undermined, because each ministry/department wants to operate independently and that leads to the existing chaos.

The effect is that the quality of service is poor, and it is easy to fly below the radar and not be compliant.

 

VGO is the solution!

Conclusion.

Sint Maarten has estimated fifty thousand inhabitants of which approx. twenty-five thousand are registered Income tax payers (most minimum wagers, just to keep their work permit) and about eight thousand businesses are registered at the tax department. All of this can be managed in a huge excel sheet or a little database, but we insist on having separate systems and processes for each department e.g. SZV has the same tax systems as the tax department.

Chamber of Commerce and Economic affairs have similar systems which could have been integrated or connected.

Not to burden you with too many details, we can do so much more at a much lower cost and with much more effectivity, if we work together.

We don’t need a big bang, because all it means is that some consultants and whoever employ them will get the big bucks, all at the tax payers’ expense.

VGO IS HE WAY TO GO….. A locally growth product!

 

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