(from Daily Herald) THE HAGUE–The Government of St. Eustatius wants exemptions or deductions for the property tax (vastgoedbelasting) for large investments, at least for a limited period, because the tax is bad for the investment climate. Commissioner Koos Sneek of Finance informed The Hague of its objections to the retroactive assessment and levying of the one per cent property tax in a memo dated June 18, and which The Daily Herald received on Tuesday.
Saba also has objections to the implementation of the property tax and has voiced its concerns in a separate letter to caretaker Dutch Minister of Home Affairs and Interior Relations Liesbeth Spies.
St. Eustatius would rather see stimulating measures for potential investors, instead of a property tax. According to government the property tax, which should have been implemented per January 1, 2011, will have adverse effects on local investments.
According to Sneek there seems to be sufficient room to build in investment stimulating measures through exemptions since it is expected that the property tax will yield much more than the US $4.1 million that the Tax Office has pre-calculated for three islands, Bonaire, St. Eustatius and Saba combined.
For organisational reasons the Tax Office has not been able to implement the property tax per January 1, 2011 as planned. That is why it was decided to levy the tax retroactively per August 1, 2012 and to collect the backlog via 11 month terms instead of one-year terms. “This will increase the tax burden of the property tax with an additional nine per cent in the next years,” stated Sneek in his memo.
In a meeting that Statia’s Government had with Spies earlier this month, the Executive Council informed the Minister of the adverse
effects on the investment climate on all three Dutch ‘public entities’ Bonaire, St. Eustatius and Saba. In his memo, Sneek summed up the arguments against the property tax, which was introduced to replace the profit tax of 34 per cent. Levying one per cent tax over the value of the property sounded like a deal, but in fact it is not, argued the Commissioner.
“The property tax, contrary to profit tax, has to be paid at all times, whether the company makes a profit or not.”
The property tax provides no possibilities for the fiscal deduction of write-off and investment deduction. “This eliminates two important stimulations to invest,” explained Sneek.
Companies have to pay the property tax at the moment that the potential investor buys the property or attains it in long-lease (erfpacht). “At that moment the investor has made no money yet and as such the property tax will have to be added as a cost on top of the investment. As a result these costs are much higher than on islands in the region that have no property tax.”
The Commissioner further elaborated that the property tax, without offering possibilities for tax exemptions in case of investments, puts the Caribbean Netherlands in a negative position compared to surrounding islands.
Sneek pointed out that other islands offer so-called tax holidays whereby a qualified investor is exempted from having to pay profit tax and import duties for 10 years. “This is obviously a tremendous stimulus for investors and has a positive effect on local employment.”
The option to pass on losses of previous years is not possible with the property tax, unlike the profit tax. This had an adverse effect for companies that still had losses that were being passed on to 2011 upon the introduction of the new fiscal system on the three Dutch ‘public entities’ per January 1, 2011. “These losses cannot be passed on or set off against anything anymore.”
The Commissioner requested to place the property tax as well as tax exemptions and other stimulating incentives for investors on the agenda of the next Dutch Caribbean week in The Hague in October.