WILLEMSTAD – Opposition party PAR is calling for a sweeping reform of Curaçao’s tax system, replacing the current payroll tax (Loonbelasting) and sales tax (Omzetbelasting) with a value-added tax (VAT). According to the party, this shift would simplify administration, increase transparency, strengthen the economy, and ultimately generate higher revenues for the government.
The proposal focuses exclusively on replacing OB and LB with VAT, leaving other taxes untouched.
Analysis of Tax Revenues
In 2024, sales tax generated 655 million guilders, while payroll tax added 423 million guilders, totaling 1.078 billion guilders in government revenue. With projected economic growth of 3.2% and inflation of 2.5% in 2025, the tax base is expected to expand by 5.7%, creating room for increased collections under a VAT system.
PAR examined two scenarios:
Scenario 1: Replace OB and LB with VAT while proportionally adjusting tax rates. The current OB rates (0%, 6%, 7%, 9%) would shift to 0%, 9.3%, 10.9%, and 14%. This would yield 1.205 billion guilders in tax revenue in 2025, an 11.8% increase compared to 2024.
Scenario 2: Replace OB and LB with VAT but maintain existing rates of 0%, 6%, 7%, and 9%. Thanks to a broader tax base and more efficient collection, revenue could reach 1.276 billion guilders, representing an 18.4% increase over 2024.
Social Safeguards and Digital Innovation
While promising higher revenues, PAR stresses the need for social measures to protect vulnerable groups, such as income support, food subsidies, and tax refunds on basic goods.
Digitalization is another pillar of the reform. PAR proposes mandatory e-invoicing, real-time monitoring, and stricter compliance controls, combined with a broad communication campaign to inform businesses and the public.
The party suggests that consultations with social partners and the private sector should begin this year, with an eye to introducing VAT on January 1, 2026. Key topics would include exemptions, export-related “0% VAT,” refund systems, and the full transition plan from OB to VAT.
Risks and Challenges
According to PAR, the main risks include public and business acceptance, the capacity of the Tax Department to manage the new system, and potential price increases affecting lower-income households. These risks, they argue, can be reduced through a phased introduction of VAT, compensation buffers for vulnerable groups, and continuous dialogue with all stakeholders.
“Curaçao has the opportunity to modernize its tax system and secure more stable revenues for the future,” PAR stated.
