Published On: Thu, Jul 7th, 2016

Abolish income tax

Jacob Gelt DekkerA reader was so kind to post the following observation.

“In the period 2000 – 2010, the GDP of the island of Curacao grew nominally from Ang. 3795.7 million to ANG. 5282.9 million. Corrected for inflation, the real economic growth over the period 2001 - 2010 was approximately ANG. 263.6 million; just under 7%, or less than 0.7% on average per year. During that same period, the population increased from 130,627 in 2001 to 149, 679 in 2011, an increase of 19,052, or nearly 15%. In 2001, the GDP per capita was still ANG. 29 058, in 2011 it dropped by 1.938 to ANG. 27 120 in real terms, corresponding to a decrease of 6.7% real GDP per capita. (The figures were provided by the CBS.)”

Great information for economists and politicians, if correct. In the present election time, from now till September, many voters would like to see the same analysis for the period 2011-2016, the period of autonomy and PS-dominance in government.

To make the calculation somewhat more complete, one should also add the 1,2 million tourists, visiting the island every year. If overnight stays are about one week per tourist, this group will make up for about 25,000 full-time residential equivalents.

Unfortunately, island demographics are even more complicated. Legally or illegally, an estimated 25-30,000 Islanders hold dual residencies. They live on the island as well as in The Netherlands. Part of these 25-30,000 Cura-Dutch residents overlap with the so-called tourists but prefer to remain in disguise and under the radar since many make their money in the shadow economy, mostly in the narco industry. Others take advantage and illicitly benefit from Dutch welfare payments. Estimates of per capita income of this group vary from ANG 50,000 to ANG 80,000 per year.

Since official registration of islanders in the Netherlands was blocked by politicians in the 2000-2010 period and the shadow economy deals in US Dollars and Euros, the complete demographic and economic picture remain obscure, and any calculation holds little value. Plotting a sensible economic strategy for the island is no more than guesswork. Administrators are left with insufficient and inadequate demographics, and year after year, government after government, governmental decisions in practice fall short of any planning. National income from taxes derives only from the legitimate part of the population of about 60-70%, the rest remains in the shadow, tax-free, or with a little turnover tax.

To make governing even more complicated, most politicians and administrators are politically blind and live in denial. Crime figures, migration and welfare benefit fraud statistics and estimates, for them, are errors committed by foreigners and never by the local population.

The most efficient way to deal with the shadow economy for any government is to abolish income and corporate tax and replace it with a VAT-tax of about 21%. VAT-tax income would outperform present governmental income levels, and expose all those who happily seem to live a life of luxury in the shadow economy, even as politicians.

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