Published On: Fri, Feb 1st, 2013

VBC: No convincing motivation for sales tax increase

WILLEMSTAD – The Association Business Community Curaçao (VBC) doesn’t find the government’s motivation to increase the sales tax (ob) very convincing. The VBC wrote this in its recent newsletter. The government will most likely introduce a differentiation of the sales tax (0, 6 and 9 percent) per March 1st.  With that the government expects an increase of the tax revenues with 17.8 million per year. However, the VBC is critical: “It is likely that the previous sales tax increase from 5 to 6 percent in January 2012 had also led to less economic growth and consequently less revenue than expected. The reaction to increase the sales tax raises the necessary questions. After all, there’s a fair chance that additional burdens will have a negative effect on the economic growth and yield less tax revenues. If this is the case do we increase the sales tax to 12, 15, 20 percent, or more?”

The VBC also wonders if the proceeds of 17.8 million guilders countervail the ‘considerable administrative and complex control-technical work involved with this system’. Furthermore, the government is an unreliable partner, according to the VBC, considering the meanwhile ancient suggestion to increase the sales tax to 7 percent, remove accumulation and introduce a zero tariff for goods and services of bare essentials, to spare the lower income groups. It was always said this wasn’t possible because it would upset the simplicity of the sales tax system. It now appears this argument is suddenly invalid.

According to the VBC, apparently the sales tax differentiation ‘comes down to choosing the line of least resistance in order to increase the government’s revenues. The organization doesn’t think this will tackle the main cause of the government’s deficits. “The government must adjust its expenditure. One of the consequences of this choice is that it will worsen the competitive position in general, and that of tourism, wholesale, toto’s and mini-markets in particular, sectors with a relatively high employment.”

Click Tag(s) for Related Articles: