Responding to more than 50 questions from Members of Parliament, Gumbs offered a layered justification rooted in legal precedent, fairness and fiscal necessity. While the issue has generated intense scrutiny, with some MPs even filing and/or supporting a motion for suspension, Gumbs was unequivocal: the dividend withholding tax is not a new tax, but a long-overdue reform in tax enforcement.
"It is also important to highlight that the majority of our tax legislation dates back to the 1970s and has seen only limited updates since then. I believe it is important to clarify that the tax workgroup consists of both tax and fiscal specialists with expertise in legislative processes. Therefore, I want to dispel any perception that we simply took an old law and brushed it off without any review or consideration. As such, based on the advice from these specialists it was decided to proceed with the introduction of the DWT in its current form," the Minister said.
๐๐๐ ๐๐ฅ ๐ ๐จ๐ฎ๐ง๐๐๐ญ๐ข๐จ๐ง: "๐๐ก๐ข๐ฌ ๐๐ฌ ๐๐จ๐ญ ๐ ๐๐๐ฐ ๐๐๐ฑ"
Minister Gumbs began by addressing the notion that the policy is introducing a new form of taxation.
"First and foremost, paying tax on dividends is already happening. The current ordinance regulating income tax, Article 3, paragraph 4B, clearly states that income received from rural capital, movable capital is considered taxable income," she said. "Article 5 further clarifies that under paragraph one, dividends are explicitly included in this category. In other words, individuals receiving dividends are already required by law to declare and pay tax on that income."
Gumbs emphasized that the legislation does not create a new obligation. Instead, it modifies the timing and method of tax collection. "The proposed dividend tax legislation does not introduce a new type of tax, but rather changes the timing and method of collection, similar to the way wage tax functions as a withholding on income."
This change is crucial, according to Gumbs, because the existing system relies on individuals to self-report dividend income at the end of the tax year. "Under the new system, this process is improved. The tax will be collected at the moment the dividend is paid out, rather than waiting for the annual tax cycle. It ensures that the government receives the revenue immediately, which strengthens the country's liquidity position and reduces the risk of underreporting or non-payment."
She also emphasized the systemic improvements in compliance this measure would bring. "It simplifies enforcement and strengthens the government's financial position."
And though the Minister did not delve too deep into the "who" and "when" of the past, it should be noted here for clarity that the dividend withholding tax was signed in September 2023 and approved in October 2023, before her tenure as Minister of Finance (more on that below).
She added that any proposal to reduce existing taxes (like profit and wage tax) must be matched by a clear and realistic plan to replace the lost revenue. The introduction of the dividend tax was specifically intended to help fill that gap and strengthen the countryโs fiscal sustainability. As this measure would serve to increase collections by including tax collections from foreign taxpayers who are often more difficult to reach under the current system.
"However, in light of the strong opposition and even the submission of a motion by the MP to suspend its implementation, it must be clearly understood that removing this measure without an alternative will create a significant shortfall. If the dividend tax is set aside, then it becomes absolutely necessary for concrete and feasible revenue-generating alternatives to be presented. This, in turn, will delay any potential tax reductions, as new solutions will require time to develop, due to legislative process, and implementation."
๐๐ง๐๐จ๐ซ๐๐๐ฆ๐๐ง๐ญ ๐๐ก๐๐ฅ๐ฅ๐๐ง๐ ๐๐ฌ: ๐ ๐จ๐ซ๐๐ข๐ ๐ง ๐ฏ๐ฌ. ๐๐จ๐๐๐ฅ ๐๐๐ฑ๐ฉ๐๐ฒ๐๐ซ๐ฌ
The Minister addressed concerns that the tax disproportionately targets foreign investors. She responded by pointing to the real enforcement challenges faced by the Tax Administration.
"Currently, both local and foreign taxpayers are required to pay income tax on any dividends they receive. From an enforcement and collection standpoint, there is a clear difference between the two. Collecting tax from foreign taxpayers who may have limited ties to St. Maarten and may leave the jurisdiction shortly after receiving their dividends is far more challenging."
She elaborated on the mechanics: "By implementing withholding at the source, the government partially shifts the responsibility to the paying company, which will deduct the tax before the dividend is distributed. This mechanism secures revenue upfront and significantly improves compliance, especially in cases involving foreign recipients."
She also noted the difficulty in seizing foreign assets: "Foreign taxpayers typically have few or no local assets that can be seized or liquidated through enforcement measures to recover any outstanding tax debts, in contrast to locals."
The Minister was also asked for a guarantee that there will be no cash flow disruptions or refund delays for businesses receiving credited tax in the following year. ย She explained that the legislation does not impact the cash flow of the distributing company. It only changes the timing and method of tax collection, not the companyโs financial obligation.
"For example, under the current system, if a company pays out 100 guilders in dividends, the full amount goes to the shareholder, who later declares it in their tax return. Under the proposed system, the company withholds 10 guilders and remits it to the tax authority, while the shareholder receives 90. This 10-guilder withholding is a prepayment toward the shareholderโs income tax. In both cases, the company still disburses 100 guilders. Therefore, its liquidity remains unchanged. This is simply a more efficient, upfront compliance mechanism," she said.
๐๐ญ๐๐ค๐๐ก๐จ๐ฅ๐๐๐ซ ๐๐จ๐ง๐ฌ๐ฎ๐ฅ๐ญ๐๐ญ๐ข๐จ๐ง๐ฌ ๐๐ง๐ ๐ญ๐ก๐ ๐.๐.๐ ๐๐ซ๐จ๐ฃ๐๐๐ญ
Gumbs clarified that consultations were held in May 2022 under the T.W.O. (Tijdelijke Werkorganisatie) project.
On May 18, 19 and 20, 2022, the following stakeholders participated in the sessions on tax reform: Notaries, the Tax Committee; the Tax Administration, TEATT, SZV, VSA, the Gaming Control Board project officers, the Central Bank of Curacao and St. Maarten, he Chamber of Commerce, the Bankerโs Association, St. Maarten Insurance Association and St. Maarten Insurance Brokers Association, SHTA and various wholesalers.
"There was no feedback submitted regarding the enactment of the dividend withholding tax," she said. "As previously stated, dividend income is already subject to taxation under current legislation. The proposed measure simply enforces the collection of this existing tax through a withholding mechanism of 10%, thereby strengthening compliance and streamlining the process."
Gumbs also committed to reviewing what supporting materials from those consultations, such as presentations, can be shared with Parliament. "I kindly ask for some time to assess what supporting materials such as presentations and related documentation can be retrieved and shared with Parliament."
๐๐ฎ๐๐ฌ๐ญ๐ข๐จ๐ง๐ฌ ๐จ๐ ๐๐จ๐ฆ๐ฉ๐๐ญ๐ข๐ญ๐ข๐ฏ๐๐ง๐๐ฌ๐ฌ ๐๐ง๐ ๐๐จ๐ซ๐ฉ๐จ๐ซ๐๐ญ๐ ๐๐๐ฑ
Some MPs argued that St. Maarten's corporate income tax rates are already high and that the imposition of a dividend tax without simultaneous corporate tax relief would render the jurisdiction less competitive.
"As mentioned earlier, paying taxes on dividends is not something new," Gumbs reiterated. "What the proposed legislation does is not introduce a new tax, but rather regulate the timing of payment and shift the responsibility for withholding the tax."
She stressed that revenue from the withholding tax would be used to facilitate the long-discussed reduction of wage and profit tax rates. "The proposal to reduce existing taxes can be matched by a clear and realistic plan to replace the lost revenue. The introduction of the dividends tax was specifically intended to help fill that gap."
๐๐ฆ๐ฉ๐ฅ๐๐ฆ๐๐ง๐ญ๐๐ญ๐ข๐จ๐ง ๐๐ง๐ ๐๐๐ฆ๐ข๐ง๐ข๐ฌ๐ญ๐ซ๐๐ญ๐ข๐ฏ๐ ๐๐๐๐๐ข๐ง๐๐ฌ๐ฌ
Gumbs acknowledged the pressures faced by the Tax Administration but argued that the annual nature of dividend distribution simplifies things.
"Preparations for implementation are underway," she said. "This includes the development of the necessary form, integration into the Receivers and Finance systems, and the procurement of an appropriate system to manage the process."
She noted that staff were already being engaged and systems were in the process of being updated. "Certain staff members within the Tax Administration have already been informed as they are actively assisting with these preparatory steps."
Responding to concerns about capacity, she stated: "While the Tax Office is under pressure, since dividends are typically distributed once a year, the withholding by locally registered companies simplifies the process."
๐๐จ๐ฅ๐ข๐ญ๐ข๐๐๐ฅ ๐๐ฎ๐ฌ๐ก๐๐๐๐ค ๐๐ง๐ ๐ ๐ข๐ฌ๐๐๐ฅ ๐๐ญ๐ซ๐๐ญ๐๐ ๐ฒ
MPs raised concerns over the timing of the tax and the lack of public outreach. Gumbs acknowledged that lessons had been learned.
"I acknowledge that raising the issue on the floor of Parliament may not have been the most ideal approach. However, we learn and we grow from experience, and I remain committed to transparency and improved communication moving forward."
Despite pushback, Gumbs held firm: "This legislation does not require parliamentary approval and can be formalized for the country of St. Maarten through a national decree. However, proper implementation must be prepared."
She reiterated the long-term goal: "The intention is to have the withholding system of the dividend tax increase as fast as possible. This is to increase compliance and generate extra revenue as of the year 2026."
She also addressed criticism that the plan was rushed or incomplete. "Given that conflicting information is being presented, I believe it is necessary to prevent any further misunderstandings by inviting an independent, non-political tax specialist to Parliament."
She also addressed the issue of political games, as referenced by MP Darryl York.
"On October 5, 2023, the then Council of Ministers, under the NA-UP-led government, approved Phase 1 of the tax reform plan, three months before the elections.
"That Phase, referenced by MP Irion, outlined several tax measures that were never implemented. Yet under point D, it clearly states: "bringing into force the already existing National Ordinance on Dividend Withholding Tax 2000 and possibly expanding with revenue tax." This was not a new proposal, but the same law Iโm now working to enforce.
"So let me be clear: the previous government approved this measure. Today, when I bring it forward, it sparks headlines, motions, and cartoons. That, honorable members, is what I meant by politics being played."
"While I may have moved quickly in presenting a revenue solution that enables future tax relief, I fully support Parliamentโs role in open and democratic debate. As stated earlier, I propose inviting a tax expert to present the technical facts. This should be a solution-driven discussion, not a political one.
"Iโve taken note of the concerns raised about the dividend tax. While I believe the measure may not have been fully understood at first, I value the feedback. I will revisit the implementation and return to present a refined proposal to Parliament."
๐ ๐๐๐ญ๐ญ๐๐ซ ๐จ๐ ๐๐ฎ๐ฌ๐ญ๐ข๐๐
Gumbs concluded her presentation with an appeal for equity and fiscal sustainability:
"People living and working in St. Maarten contribute faithfully through their wage taxes. At the same time, individuals living abroad benefit from dividends earned by companies operating here... yet they donโt always pay their fair share."
She emphasized that failure to enact this reform would widen the fiscal gap: "If the dividend tax is set aside, then it becomes absolutely necessary for concrete and feasible revenue-generating alternatives to be presented. This in turn will delay any potential tax reductions."
"This measure is meant to correct that imbalance. I believe this tax represents a fair and effective means of generating revenue for the country. It ensures that all who benefit from the economy, including foreign investors, also contribute to its continued development."
"My primary focus has always been to generate sustainable revenue for Country St. Maarten,
and this measure is a step in that direction. At this stage, opting to completely overhaul the legislation and return to the drawing board would not only set us back significantly, but also delay much-needed progress. While there is always room to make adjustments and improvements to the law, requesting a complete restart, only to have it vetted again by the
same legal specialists who were already involved in its development, seems counterproductive."
With Parliament still debating the issue and a motion tabled to halt the tax's rollout, the outcome remains uncertain. But Minister Gumbs has made her position unambiguously clear. The dividend withholding tax, in her view, is not a burden, it is justice.
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