WILLEMSTAD - According to the Chairman of the Committee for Financial Supervision Raymond Gradus, Curaçao economy is expected to recover. “But not yet sufficiently for a budget balance in 2022, so that liquidity support will still be needed in that year Everything will have to be done to make it as small as possible.”
In the coming years, the Cft chairman is convinced that 'controlling expenditure must be given the highest priority'. There are certainly possibilities for this, says Gradus. “Compared to countries in the Caribbean region, labor costs in the public sector are high.”
With the Early Voluntary Retirement (VVU), initiated by the former Rhuggenaath cabinet, 'a first step is taken' in the downsizing of the government apparatus. “But more steps are needed.” The employer's costs are extremely high due to the rising pension premium.”
Government revenues also need to increase. “Given the high marginal rates, broadening is the most appropriate way. In income tax, broadening of the tax base can be achieved by phasing out deductible items. For example, the interest on consumer credit is still deductible and this leads to high marginal rates for everyone. Another measure is an income-related basic cut, as advised by the Budget Review Committee in 2019.”
Through a further shift from direct to indirect taxation, 'compliance can be increased', says Gradus. “By broadening the tax base, revenues can be increased in the shorter term. Less distortive taxation can promote economic growth in the medium term, thereby increasing the economic base of taxation. Many benefits can be expected from the introduction of value added tax.”
The main advantages of VAT compared to turnover tax (OB) are: the prevention of the accumulation of levies that occurs in the case of onward delivery between links of the production chain; the export may be exempt from duty; and increasing compliance through self-assessment in the supply chain.