Law proposal to adapt taxes on public entities

September 04, 2011 3:47 PM

The Dutch government will take several measures to adapt the fiscal system of the public entities Bonaire, St. Eustatius and Saba in 2012 via a law proposal that will be presented on September 20, Budget Day.

Dutch Minister of Home Affairs and Kingdom Relations Piet Hein Donner announced this in a letter that he sent to the Second Chamber on Thursday. State Secretary of Finance Frans Weekers will discuss the issue with the Second Chamber's Permanent Committee of Finance next week Thursday.

The legislation proposal is in anticipation of the results of an intra-departmental investigation by the Ministries of Home Affairs and Kingdom Relations BZK, Economic Affairs, Agriculture and Innovation EL&I, Finance, Social Affairs and Employment SZW and Traffic and Water Management VWS.

The intra-departmental investigation serves to acquire insight into the economic situation in Bonaire, St. Eustatius and Saba by looking at, among other things, the development of consumer prices, purchasing power and the increased tax burden. The flow of goods from Curaçao to Bonaire and from St. Maarten to St. Eustatius and Saba will also be analysed.

Donner stated that currently there was insufficient insight on the effects of the new fiscal system to determine the consequences for the different sectors on the islands. The intra-departmental investigation should shed some light on this.

The higher indirect taxes in the new fiscal system may have contributed to a "relatively high inflation" on the islands, but the high inflation was also caused by increased food and oil prices on the world market, the dollarisation and "other margins" by businesses.

Donner said Dutch parliament was right in concluding that the new fiscal system on the islands which went into effect on January 1 this year resulted in a higher indirect taxes burden and a lower tax burden where it comes to direct taxes in comparison to the former Antillean tax system.
"On balance, we are not striving for higher tax profits. It is not the intention that the Caribbean Netherlands has to pay more taxes on macroeconomic level as a result of the new fiscal system. That doesn't mean that the implementation of the new fiscal system would have a neutral effect for all taxpayers on microeconomic level or for all sectors," stated Donner.

Donner admitted that the cost of doing business in Bonaire, St. Eustatius and Saba increased for some employers since the islands became Dutch public entities on October 10, 2010. The private sector and citizens were under the impression during the process leading up to the new constitutional status that nobody would be adversely affected. In his letter in which he responded to questions posed by Parliament's Permanent Committee for Kingdom Relations Donner nuanced this expectation.

"The (Dutch) cabinet strived to maintain the employers' cost in 2011 on macroeconomic level on the same level as in 2010 when it decided on the premium percentages," stated Donner, who explained that differences between employers could evolve because the premium structure changes and because there were more regulations in health care in 2010 compared to 2011 which resulted in some employers having to pay more in 2011.

According to Donner, the social facilities on the islands may be less than in the Netherlands as was agreed upon with the local governments, but the taxes are also "significantly" lower than in the Netherlands in the interest of the enterprise climate on the islands.

Donner admitted there were problems, but added that overall many things went well in the transition of the islands to the Netherlands. "The cabinet strives to realize visible improvements for the people of the islands. That process takes time. Many things are going well which has lead to improvements. There are also problems in the implementation and those have the specific attention of the cabinet," stated Donner.

2 September 2011