MP Kotai wants Govt to look beyond cuts and examine alcohol, tobacco “sin tax”

GREAT BAY--Member of Parliament Viren Kotai is calling on Government to place the same urgency on finding new and sustainable sources of revenue as it has placed on reducing expenditure, arguing that St. Maarten cannot continue approaching its financial challenges primarily through cuts.

Kotai raised the issue during the ongoing budget process, where ministries have repeatedly been questioned about expenditure, cost reductions and potential savings. While stressing that fiscal discipline remains necessary, the MP said there is a limit to how much Government can continue cutting before attention must shift more seriously toward expanding the country's revenue base.

"We cannot cut our way into prosperity. At some point, we also have to generate more," Kotai said.

As one area deserving consideration, Kotai pointed to taxes commonly referred to as "sin taxes," particularly targeted taxation on alcohol and tobacco products.

He said alcohol and tobacco remain consistently consumed products and Government should determine whether additional revenue can reasonably be generated from them without pretending that such a measure alone would resolve the country's wider financial challenges.

Kotai stressed that his proposal is part of a broader argument about Government's approach to public finances. Throughout the budget process, considerable attention has been placed on where ministries can save money, reduce spending or delay expenditure. He believes an equally serious exercise should be undertaken to identify revenue that St. Maarten is either not collecting or could collect more effectively.

"I am not suggesting that taxation alone will solve our financial challenges, but when we are going through Ministry after Ministry looking for areas to cut, we should be putting just as much effort into identifying new and sustainable revenue streams," Kotai said.

Kotai's proposal would not be unusual within the Dutch Caribbean, where several jurisdictions already impose specific excise duties on alcohol and tobacco products.

In Aruba, Government information confirms that alcohol, alcoholic beverages and tobacco products are subject to excise duty. Aruba Customs also requires excise duties to be paid when quantities of alcohol and tobacco brought into the country exceed established exemptions. An International Monetary Fund review of Aruba's tax system specifically categorized the country's alcohol and tobacco duties as "sin taxes."

Curaçao also maintains excise taxation covering these products. Its tax framework includes separate legislation governing excise on distilled spirits, beer and cigarettes. In 2019, Curaçao amended those laws as part of a package of revenue-raising tax measures, demonstrating that excise rates can form part of a broader strategy to strengthen Government revenues.

On Bonaire, the current excise system applies directly to beer, wine, other alcoholic products, cigarettes, cigars, cigarillos and smoking tobacco. Current published rates include US$8.69 per 100 imported cigarettes, US$67.04 per hectolitre of beer and US$128.50 per hectolitre of wine, with separate rates applying to other alcoholic products and tobacco.

The Dutch Caribbean does not, however, have one uniform approach. On Saba and St. Eustatius, the current system only applies excise to gasoline and does not impose excise on beer, wine, spirits or tobacco products.

The different systems, Kotai believes, give St. Maarten examples that can be studied rather than requiring Government to approach the matter without regional comparisons.

The issue also raises a question about St. Maarten's existing tax structure. Government's current Customs information states that the only tax/excise levied by Customs St. Maarten is on unleaded gasoline.

Against that background, any review of alcohol and tobacco taxation should first clearly establish what is currently being levied, through which legislation and Government department, how much revenue is presently generated from these products and what additional revenue could realistically be collected under a revised system.

Kotai wants Government to provide concrete answers rather than simply adding another revenue proposal to a list of measures that remain under consideration.

He specifically wants to know whether Government has considered increasing, restructuring or otherwise introducing a more effective tax framework for alcohol and tobacco, how much additional annual revenue such a measure could generate, and what the impact would be on the country's overall revenue position.

The MP also wants a clear timeline.

Kotai said too many policy discussions end with measures being described as "under consideration" without a corresponding date for a decision, legislative action or implementation.

He therefore wants Government to indicate whether an alcohol and tobacco tax review will actually be undertaken, who will conduct the financial analysis, when that work will be completed and, if Government determines that changes are justified, when Parliament could expect the necessary legislation.

For Kotai, the larger issue remains the balance between saving and earning.

Government, he said, must continue examining unnecessary expenditure and improving efficiency, but the budget discussion cannot remain centered almost entirely on reducing what the country spends. A sustainable fiscal strategy must also include serious decisions about how St. Maarten expands and diversifies the revenues required to finance Government services.

"There is only so much that we can cut before we have to seriously ask ourselves: where and how can we make more money?" Kotai said.

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