August 17, 2012 7:14 AM
PHILIPSBURG - Starting January 2013, turnover derived from timeshare, hotel room and car rental will be subjected to Turnover Tax (ToT).
This amendment is a prerequisite to simplify the tax system, lowering the administrative burden and further improving the tax compliance, Finance Minister Roland Tuitt said in a press statement Friday.
Government had already been working on a draft legislation to abolish the former island-ordinances on timeshare-, room- and car rental tax by the end of this year. Work on this change has been ongoing prior to the submission of a draft legislation presented by United Peoples' (UP) Member of Parliament Jules James in July, Tuitt pointed out.
James has recommended that the timeshare tax move from a weekly rate of NAf. 90
(US $50) to a daily rate of US $10, resulting in a 40 per cent tax increase. It was "probably unknown to the MP" that government had already been working on a draft law, the minister added.
A specific provision on daily rates for timeshare will be introduced in the ToT Ordinance, which will be differentiated by the size of the timeshare units. It is "unreasonable" that an owner of a small timeshare studio pays the same amount of tax as an owner of a three-bedroom timeshare unit.
The introduction of a differentiated daily rate has already been discussed with Jim Rosen, vice-chairman of St. Maarten Timeshare Association (SMTA) earlier this year, according to the release.
In comparison to other Caribbean destinations, the current five per cent room tax here is relatively low. In Aruba, the tax stands at 9.5 per cent, Anguilla 10 per cent, Antigua and Barbuda 8.5 per cent, the Bahamas 12 per cent, Barbados 8.75 per cent, Curaçao 7 per cent, Dominican Republic 23 per cent, Grenada 8 per cent, Haiti 10 per cent, Jamaica 15 per cent, Trinidad and Tobago 10 per cent. In Tuitt's opinion, there is still some room for increasing the rate without harming the tax competitiveness of St. Maarten's hotel industry.
Car rental companies are currently subjected to 5 per cent car rental tax and ToT. As compared to hotels and timeshare, an exemption is not provided in the ToT Ordinance to prevent double taxation for car rental activities, the release explained. As a result, car rental companies have to file a tax return for both the car rental tax and ToT. They are taxed twice on the same turnover.
Abolishing the car rental tax will significantly lower the administrative burden and make the tax system fairer, according to the minister. A financial analysis is being made to determine the budgetary impact of this and other draft legislation on the government's coffers.