Today, our new Parliament will meet to discuss issues facing Sint Maarten. We write this editorial to propose several topics that could enhance that discussion, but also inform pressing issues facing society as a whole in the ongoing process to recovery.
A parallel can be made between our current situation and the post-war era in the Netherlands – there were no jobs, vital infrastructure was heavily damaged, and the economy was crippled. Reconstruction should be targeted – Sint Maarten needs to identify the specific sector that has the potential to generate a positive impact across the economy the immediate and long-term future.
Tourism is the backbone of our society and the government’s task is to uphold this
The backbone of our entire economy is the tourism industry. Tourism contributes to GDP through a multitude of businesses and industries, many of which are lucrative such as hotels, airports, and recreational services. In addition to its direct contribution to GDP, investments Tourism also contributes to GDP by supporting jobs in construction, business services and IT services, and various other sectors.
Many hotels are still inoperative for a variety of reasons. Resurrecting hotels is imperative to our society; therefore, we shouldn’t reduce this issue to a matter for businesses to solve on their own. The decline in tourism does not only affect the hotels and their employees: GEBE, a partially state-owned company and major employer on the island, just announced that it is in financial dire straits as a result of not being able to sell enough electricity and water. Due to budget cuts, GEBE must now dissolve fringe benefits intended for what’s left of its workforce. GEBE attributed its current predicament to a 30-40 percent loss in revenue. Its major clients, hotels such as The Westin St. Maarten, Dawn Beach Resort and Spa, the Sonesta and Divi Resorts have been out of business since hurricane Irma. Telem, UTS and other major companies are undoubtedly facing the same issues. SZV is confronted with a severe decrease in premium income because of the massive decrease in the working population.
What has Sint Maarten done to ensure that the companies continue to participate in the economy and the renewal of the tourism industry? Not enough. At present, stakeholders in Sint Maarten are systemically stalling the recovery of the tourism industry in ways which handicap pillars of our economy. We present possible solutions for parliament to explore, regarding the private sector and taxation, to resurrect the tourism industry and to create a favorable environment for investors:
Proposed Solutions for Business
At this moment, the interests of our populace and this country yield to the interests of individual business owners and investors. Businesses have cited protracted insurance issues as an excuse for not reopening. The government can take measures to drive businesses to action.
Businesses should commit to reopening in-order to create jobs, fuel tourism, and subsequently contribute to stabilizing our economy. The government can take matters into its own hands and exercise the right to repossess the properties. Our country stands to lose much needed revenue while hotels and resorts battle insurers. Let us explain: If the average tourist stays for 3-4 nights and we estimate 2 million tourists per year and we consider the average daily expenditure at $100 per day (which is very conservative). In the end, we would see $800 million dollars in lost revenue– almost 80 percent of GDP!
The government could enforce policies that incentivize business to cooperate voluntarily and penalize those that do not choose to act promptly. Any hotel that is not operating could be mandated to submit a recovery plan within 2 months and to express its intention to participate. Either the hotels and resorts cooperate, or their company faces the risk of repossession, after which they will be sold to entrepreneurs who do and want to contribute to the reconstruction of our economy.
Repossession as a possible penalty should only be considered as a final alternative. We want Sint Maarten to work in cooperation with businesses for the benefit of all parties. The spirit should be: either one ‘works with us or against us’.
Proposed solutions regarding taxation
A simplified and more favorable tax-system is one of several ways to incentivize business. a more efficient and business-friendly tax system should be introduced to motivate businesses in the tourism industry to reopen. Tax-rates are currently too high to render Sint Maarten a competitive market in the Caribbean for foreign direct investors. The only taxes that generate revenue (turnover, profit, wages, and special activities) are mainly reported by private companies and the only one truly benefitting from this is the government. We need to refocus our tax-system around businesses. A reformed system could lower tax rates for business owners while implementing a compliance system that is convenient and easy to participate in. Companies would only pay taxes on turnover, wages, profit and special activities while preemptively handling employee taxes on income. As a result, companies would only pay out net salaries to their employees and preemptively pay taxes, on their behalf, to the government. Similarly, the wage tax for employees must be lowered. In a system that only sees 40-60 percent of island participation, a reform like this would funnel public servant capacity to auditing fewer individuals and primarily companies.
Let’s not forget what makes the ‘friendly island’ beautiful. We had gorgeous beaches, lush golf courses, and pristine marinas. All which drew tourists from the West, every year, to open their hearts and their wallets to our community. As stated before, the key to reconstruction is focusing on a facet of the economy that guarantees growth across all facets. Instead of aiming for economies abroad, Sint Maarten should shift its focus on the local tourism industry. It is up to a unified government, key stakeholders and the public to resurrect the industry from the dead. The government should take leadership by taking (perhaps) unpopular but necessary decisions that will benefit the island in the long run.
In 1945, Karel Paul van der Mandele said of the reconstruction of Rotterdam, “before us lies the major task of building a new city. Employers and workers must join and persevere”. It’s imperative now, that EVERYBODY participates in the rebuilding our country.
Authors’ Note: This is the first part in a series of articles that we will publish to encourage the government to do its part in ensuring that all stakeholders on the island are living up to their potential to bring back the tourism industry in an expedited manner way. By doing so, Sint Maarten can withstand the economic and social stresses plaguing our society. We will explore each area introduced in this article in greater detail, namely a tax reform, the administration of abandoned property and workforce, respectively.