Broker: Real estate tax for non-residents can damage St. Maarten’s reputation

PHILIPSBURG–Introducing a real estate tax on non-residents, who purchase property in the country can severely damage St. Maarten’s reputation as a trustworthy destination to invest in, says real estate broker Arun Jagtiani, of Island Real Estate.

  Jagtiani was at the time responding to part of a presentation made by Finance Minister Ardwell Irion in Parliament on Monday regarding tax reform for the country. In his presentation on Monday Irion alluded to recommendations from the International Monetary Fund’s (IMF) Fiscal Affairs Department (FAD) for new tax areas that can be introduced in St. Maarten. FAD recommended a Property Tax; however, Irion made clear that government would instead like to look at a Real Estate Tax – a topic, which his cabinet is having with the IMF/CARTAC FAD and which has also been raised with St. Maarten’s counterparts in the Temporary Work Organisation (TWO).

  Jagtiani said he is pleased to see some consideration being given to not wanting to impose a real estate tax on residents of the island. He said however, that if investors are told that there are no property taxes today, but then a few months or years later tell them “a different story,” the country’s reputation can be harmed.

  “Non-residents who have already invested on this island should be grandfathered into the tax laws the way they were when they originally purchased their property,” Jagtiani said in a statement sent to this newspaper.

  “By making sure non-residents who have already invested on this island are protected when the new legislation comes into effect, we will gain confidence and credibility as a safe destination to invest in. It might take a few years to build up the tax revenue stream from non-residents, but in the long run this type of responsible approach will keep the real estate market stronger for decades to come.  Announcing now that non-residents, who purchase property before the new tax laws are implemented will be exempted from this tax in the future, will help stimulate the local economy almost immediately.”

  He said non-residents who purchase vacation condos or homes in the country are by far the most valuable and important tourism demographic of St. Maarten’s one pillar economy.  “They invest hundreds of thousands of dollars, sometimes even millions into our local economy. Their interest drives the real estate market and stimulates development, which in turn fuels the growth of the local economy.

  Many non-residents, who own property here invest their time and money promoting St. Maarten, when they visit the island they support countless local businesses, and in times of crises they are the first ones to return to the island. It was very disappointing to read… that non-residents, who own property on this island were referred to as “those who do not contribute anything.”  You never miss the water until the well runs dry. Government needs to appreciate the value of this demographic and if we are going to start taxing them, please let’s make sure we don’t chase them away in the process.”

  Jagtiani posed a number of questions on the issue. He asked what kind of tax rate is being proposed for non-residents who purchase property on our island; what percentage of properties on the island is owned by residents compared to non-residents; how many real estate transactions happen annually on the island from residents in comparison to non-residents; does the Minister expect this number to increase, decrease, or stay the same as a result of introducing a tax on non-residents; how much money is government projecting to receive annually by introducing real estate taxes on non-residents; are the projected funds from real estate taxes earmarked for anything specific; how much money is currently collected from transfer tax annually, and why would you want to eliminate this tax, which is very easy and cost effective for government to collect and why was government unable to make a deal with Airbnb.

  He also asked if a non-resident purchases property for personal use, whether they will be taxed at the same rate as a non-resident who is doing rentals and whether a non-resident who owns a property used for commercial purposes will be exempted from tax on vacation rental income.

  He wanted to know how the real estate tax laws be enforced; what will happen to people who don’t declare or don’t pay and whether there be user friendly technology implemented for easy payments of this real estate tax.

  “With all due respect to IMF’s FAD, I’m sure they have some very smart and qualified people, but why have no local stakeholders from the real estate sector been contacted about this idea of taxing non-residents,” he asked.

  In the meantime, in his Parliament presentation, Irion explained that making a distinction between resident and non-resident, corporate and personal are essential and principal aspects of the discussion on a real estate tax. “The goal is to capture lost/missed revenue from non-residents and companies who do not already fall within another tax regime, but are currently not making any contribution to the country’s treasury while benefiting from the profits made on St. Maarten,” the minister explained.

  He made it clear that there is no intention to tax the property of the people of St Maarten. “The intentions are to look for means and ways to ensure that people who are not registered on St. Maarten or registered companies that earn money from renting their properties, short or long-term, pay their fair share just as we, the residents do currently by means of the current tax regime, such as wage tax, income tax etc.”

  Irion said he is cognizant that this particular tax will raise concern and stimulate fierce discussions, but said “let it be clear, that there is no intention to increase the burden of the people of St. Maarten with a real estate or property tax, but those who are currently not making a contribution – you will have to start. We have tried for years to make an agreement with Airbnb. That won’t be necessary anymore, if we are able to tax the same group by means of a Real Estate Tax,” Irion said.