Finance Minister Marinka Gumbs Clarifies Tax Holiday Framework

GREAT BAY--Minister of Finance Marinka Gumbs used her remarks in Parliament on Monday to correct what she described as a long standing public misconception about tax holidays in St. Maarten, while signaling that government intends to review and update the incentive framework as part of a broader tax reform agenda.

The Minister was in Parliament at the request of a question hour on the issue by MP Francisco Lacroes. She also went into several other questions MPs asked (see related story).

Gumbs said that, like many residents, she previously held strong views whenever developers received tax holidays, largely because she did not fully understand how the mechanism works. She stressed that the common assumption, that a tax holiday means an investor pays no taxes, is incorrect. According to the minister, a tax holiday applies to profit tax, all other taxes such as wage taxes, AVBZ, TOT and social premiums are paid.

The minister explained that to qualify, an investor must make a significant investment and create employment opportunities. While profit taxes may be reduced, she said economic activity is still generated through multiple channels, including the purchase and sale of goods, construction activities carried out by local contractors, and broader spin-off effects throughout the economy. Those activities, she noted, can ultimately benefit citizens through wider economic impact.

Gumbs also placed the policy in historical context, stating that the tax holiday legislation was originally created to attract foreign investors at a time when St. Maarten was still developing its economic base. She said the framework was enacted in the 1950s during the Netherlands Antilles era and reflects the reality of that period, not the reality of St. Maarten today. For that reason, she said the need to amend the tax holiday legislation is now.

Addressing concerns about equity for local businesses, the minister said that while certain tax exemptions already exist, entrepreneurs and small businesses must now receive more focused attention. She described local businesses as the backbone of the economy, and said they should be supported so they can grow, formalize, create jobs, and remain sustainable.

As part of her tax reform vision, which she described as a phased approach to stabilizing, repairing, and reforming the tax system, Gumbs said the existing incentive framework will be reviewed. She added that this review will include an update of the tax holiday policy and a specific emphasis on identifying and developing additional targeted tax exemptions aimed at supporting entrepreneurs and small businesses.

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