No tax exemptions for BES islands businesses

September 28, 2010 7:10 AM

THE HAGUE--Companies located in the special economic zones in Bonaire, St. Eustatius and Saba will pay all regular taxes. They won't enjoy any special tax benefits when the new fiscal regime goes into effect on the islands per January 1, 2011.

Dutch caretaker Minister of Finance Jan Kees de Jager stated this in a preparatory legislation consultation with the Second Chamber's Permanent Committee of Antillean and Aruban Affairs NAAZ today. The meeting served to prepare for the plenary debate on the fiscal legislation package next week Wednesday.

Companies located in the so-called trade and service zones (handels en diensten entrepôts) on the three islands will pay all indirect taxes, labour and income tax for their employees plus property tax per January 1, 2011.

Currently, companies in these zones in Bonaire and St. Eustatius pay a reduced profit tax (winstbelasting) plus several other taxes, including labour and income tax. Under the proposal for the new fiscal regime, the profit tax would be eliminated. Instead, there would be a property tax (vastgoedbelasting) and a revenue tax (opbrengstbelasting), which the Minister said were more solid, abuse-proof taxes, as they could not be dodged like profit tax.

"We don't want deviating areas," said De Jager in response to concerns of Socialist Party (SP) Member of Parliament (MP) Ronald van Raak, who had submitted an amendment to introduce a 15 per cent profit tax. The intention is not for Bonaire, St. Eustatius and Saba to compete with the fiscal systems of Curaçao and St. Maarten, assured the Minister. "We are not aiming for trust and offshore companies. This is merely about the import and transhipment of goods," he said.

Introducing profit tax in Bonaire, St. Eustatius and Saba, which become part of the Netherlands as so-called "public entities," would be disastrous for the economy and employment on the islands, said De Jager. He said it would "destroy the fragile economic balance" of the islands.

Except for the Christian Democratic Party CDA, the Minister's own party, no other party seemed happy with the legislation proposal that De Jager drew up after careful consultation with the islands.

Van Raak accused the Minister of creating tax havens and unequal fiscal regimes within the Kingdom. MP Ineke van Gent of the green left party GroenLinks wants companies to pay more taxes and citizens with a lower and middle income to pay less. Van Gent has submitted an amendment whereby an income dependent labour reduction would be introduced for the lower and middle incomes. She referred to her proposal as the Robin Hood amendment.

MP Eric Lucassen of the Party for Freedom PVV said De Jager's legislation proposal was unfair to residents of the Netherlands. He said people in the Netherlands suffered because of the financial crisis and the subsequent measures by government. An exception was made for the islands, where people and companies didn't have to endure the consequences of the financial crisis. "The Dutch people are asked to make big sacrifices and the islands are being wangled," said Lucassen.

De Jager said he understood the concerns of the Second Chamber, but added that Parliament was looking at the issue too much through "Dutch glasses." He said that initially he had done the same, but that after a visit to the islands, he had come to look at things slightly different. "I took off my Dutch glasses and put on my insular glasses," he said.

De Jager said that when he first visited the islands, he was met with much scepticism. "People were truly fearful of the white Dutch man who would come to collect the back-taxes." He said this fear was ungrounded, because no group in society would be paying more taxes under the new regime. "The tax burden will remain the same for everyone and some groups will even benefit," he said, referring to those persons with an old age pension and families with children (see related article).

He said the flat rate of 30.4 per cent for the wage and income tax was progressive because people with lower and middle incomes would have a higher tax-free sum. As a result, people with a higher income would pay more taxes.

The Minister stressed that the objective of the new fiscal regime was to have a simple and controllable system. He said there were "extreme high perception costs" to levy and collect taxes on the islands. He said there were only 9,000 to 10,000 tax payers on the three islands combined, which was very few compared to the Netherlands. He confirmed that "in a few years" the fiscal regime on the islands, which is currently mostly based on Antillean tax laws, would become Dutch.

In total, Bonaire, St. Eustatius and Saba will yield some US $50 million in taxes annually. Of this amount, US $4.1 million will be generated through the property tax and US $1.3 million through the revenue tax.

He said corporation tax (vennootschapsbelasting) and succession rights tax (successierechten belasting) were too complicated and wouldn't yield sufficient revenue compared to the effort that would have to be made by the Tax Office.

As for the exemption on excises for alcohol and tobacco in St. Eustatius and Saba, De Jager said that he was willing to look at this matter when the system was evaluated after five years. Several Members of Parliament had questioned this exemption. MP Cynthia Ortega-Martijn said that exempting these items also wasn't conducive to healthy habits. De Jager warned that having excises on alcohol and tobacco wouldn't yield much income with free-port St. Maarten so close by.

27 september 2010