HIGHER TAX COMPLIANCE: Tax payer vs Tax evader

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PHILIPSBURG, Sint Maarten — During the recent budget deliberations in Parliament the query on how a higher tax compliance would be ensured was answered by the Minister of Finance along the lines that prompter action would be undertaken after one issued warrant of payment to the tax payer. This response seemed to satisfy the Member of Parliament who posted the question. This response however suggests that higher tax compliance will be sought from those tax payers who are already in the system and paying taxes.

These taxpayers are too often confronted with bogus assessments on supposed late payments, simply because the receiver and the tax department do not have a synchronized system permitting the latter to instantaneously view the payments made by the receiver. Almost on a monthly basis tax payers are forced to issue payment receipts, issued by the receiver, to the tax department in protest of a baseless warrant for payment (due to supposed non-payment or late payment) issued by the tax department. If this protest (sending a proof of payment from their own system back) is not filed the promised new actions may not be prevented.

Yes, at times the tax payer may not have paid enough and receives a warrant for additional payment. In such cases immediate real action to collect may be expected sooner, well soon after all legal remedies have been exhausted.

Yet this promise of prompter action alone will not translate in enhanced tax compliance in the country. For it is not only those who are registered and paying taxes that are supposed to bring about a higher compliance. Is it not a fact that currently a small portion of society is carrying a far larger portion of not registered, non-tax paying entities?

Enhanced tax compliance should coincide with the promise to broaden the tax payer base and to ensure that those who are operating outside of the system are introduced to the obligations others have fulfilled for years.

To highlight a few examples of entities that should be brought in to broaden the tax payer base:

1] There are so many entities who enjoy a tax holiday without expiry date. The tax holiday was intended to permit a viable start-up to these businesses. Being in business for years now may be a reason to assume that the tax holiday may now be withdrawn and these businesses may now be included in the group of tax payers.

2] Businesses, not registered or licensed, are offering products and services, generating revenues outside the system and having no contribution obligation as they are not known. The fact that these businesses are undermining our secure business environment is one consequence, that they are permitted to engage in unfair competition practices is another.

3] Some individuals, who should be part of the tax payer group, simply abuse the dual tax system between Dutch and French St. Maarten and ultimately do not contribute in any jurisdiction. These individuals declare at our tax department that they are declaring and paying on the French side and on the French side they declare to have a foreign income and are paying in a foreign territory. The tax department on the Dutch side seems to be satisfied with that declaration and undertakes nothing to verify with the French counterpart on this declaration and payment. So many prominent and outstanding citizens, misuse this dual tax system, generate an income and pay no one.

4] Then there are the villa rentals conducted, through which revenues are generated in the Island, yet it remains unclear if this income is taxed in any jurisdiction.

Is this not a tax compliance issue as well even if it can easily be qualified as tax evasion? Yet no one deals with these forms of tax evasion (permitted or not), and of course that is simply because these evaders are not known. The promised actions above can only help to enhance the tax compliance of the known tax payer who did not file or pay correctly when prosecuted for tax evasion. The real tax evaders look on, comment and criticize those “caught” for improper tax compliance.

The need for more revenues by the country should have placed a focus on this segment of society as well, instead of a continued focus only on those known and within easy reach. Enhancement of tax compliance is therefore much more and should be much more than the promised action against the known tax payers. Enhancement of tax compliance should include all those businesses in operation under the radar and all those citizens who peddle between Dutch and French side. A simple declaration that you are declaring elsewhere should not be sufficient, this declaration should at least be supported by a copy of that foreign declaration filed. That is a start and not a costly one at that. We can only hope that tax compliance from all will be sought and not just from a few.