3 tax holiday requests, exemptions alone don’t generate investments | THE DAILY HERALD

~ ToT law to be amended ~

PHILIPSBURG–Government has received three requests for tax holidays since the passage of Hurricane Irma last year, and the requesting parties have been asked to provide additional information to complete their requests, Finance Minister Perry Geerlings told Members of Parliament (MPs) during a meeting of Parliament’s Finance Committee on Wednesday.

Geerlings did not divulge details about the three requests noting that while he was happy to address general policies, it would be inappropriate for him to discuss specific details of any investors’ requests at this stage. The three requests “have the full attention” of the Ministry of Finance and are currently under review in consultation with the investors “to achieve a mutually beneficial solution,” the minister told MPs.

Wednesday’s meeting was called to discuss the request of the Sonesta Maho Group/Sunwing for a financial package – a mixture of a soft loan with tax and other incentives. The Maho Group, operator of Sonesta Maho Beach Resort and Sonesta Ocean Point, and the Canada-based Sunwing Group current owner of Great Bay Beach Resort, had asked government for soft loans of US $12 million and US $43 million respectively, from the Dutch Recovery Fund to reconstruct and renovate the three large resort properties to withstand category five hurricanes. Geerlings made clear that the proposed development by Sunwing and the redevelopment projects of Sonesta Maho are two separate and independent investment projects.

Geerlings said tax exemptions or tax holidays “cannot singularly be identified as the driver for generating investments,” in the country. Other factors must be considered including creating a more transparent and predictable policy environment as delays in designing, implementing and executing policies have in the past negatively impacted St. Maarten’s investment climate. The Finance Ministry is currently reviewing regulations on taxes and levies on business activities, which create an additional impediment to the investment climate.

“But in fairness, we cannot just conclude that the expansion of the existing tax facilities is the solution to the lack of investment and the weak economy of St. Maarten. For that reason, initially it was proposed among other proposals to abolish all tax holiday legislation. As a result of Hurricane Irma that proposal was retracted and the idea was born to introduce incentives to reduce the financing costs of large investment projects and stimulate investment in the form of a ToT (Turnover Tax) exemption for main contractors and subcontractors involved in large construction projects. This is understood to mean: construction and first establishment, expansion, improvement or renovation of buildings. This proposal is still in its draft phase,” Geerlings noted.

He said a business and investment climate consist of more than just tax rates and tax incentives available to businesses. “However, stimulating our economy is not only the responsibility of the Ministry of Finance, but it requires a multiple ministerial effort. For us to be successful in creating an attractive investment climate, potential investors will need assurances of a simplified and clear administrative process when applying for business licences, transference of land titles or obtaining building permits, work permits, and residency permits, as examples.”

The Department of Fiscal Affairs is currently drafting an amendment to the Turnover Tax ordinance to introduce an exemption to exempt large construction projects from ToT under certain conditions. The details and requirements are currently being worked out and then it will follow as any other law changes the normal procedure. “This measure is favourable for the economic growth of country St. Maarten, especially at this time. So, we are underwriting the urgency and we are using all powers to come to a conclusion expeditiously.”

The minister said St. Maarten is moving towards a political and economic transformation in which the rules of engagement are becoming more evident. “This is critical for our financial viability as it means the difference between whether or not we can continue to attract foreign direct investments, as we strive to build a sustainable St. Maarten.

“At present, some laws set the framework for creating incentives for investors and there are some indications of responsibilities for investors where it pertains the arrangements to carry out the administrative processes involved in investment projects.”

Government is currently engaged in talks with the Committee for Financial Supervision CFT the Netherlands, the Central Bank of Curaçao and St. Maarten (CBCS), the World Bank and the OBNA Bank ( “Ontwikkelingsbank van de Nederlandse Antillen”) on financial ways to simulate small- and medium-sized enterprises and large businesses.

Discussions with the local banks in the past had no immediate results. “Our consultation request about the intention to attract a loan has gotten a negative advice from the CFT. Our position is that the negative advice of CFT was partially based on disputable interpretations of rules and regulations. Despite the negative advice, my ministry will continue pursuing the loan in other to secure funding for stimulation of the economy.”

Several MPs attending the meeting weighed in on the issue and posed a number of related questions. Some pointed out the importance of having Great Bay Beach Hotel and Sonesta Maho back up and running in the interest of the country and their workers. Some MPs also called for incentives for small and medium enterprises.

The meeting was adjourned after Geerlings made his presentation. MPs posed their questions and Geerlings provided some clarification and promised to provide answers from his ministry as well as those from colleague ministers.

Source: The Daily Herald https://www.thedailyherald.sx/islands/79608-3-tax-holiday-requests-exemptions-alone-don-t-generate-investments