WILLEMSTAD – The Curaçao Tax Authority is facing significant challenges in collecting overdue taxes, according to a recent report by the International Monetary Fund (IMF). The Tax Administration Diagnostic Assessment Tool (TADAT) assessed the functioning of the tax authority and found that tax collection is severely lacking. The report highlights particular issues with corporate income tax (CIT) and personal income tax (PIT), where payments are consistently delayed, and there are no effective penalties for non-payers.
The findings in the IMF report starkly contrast with the weekly press releases from Finance Minister Javier Silvania, which typically emphasize the monthly increase in tax revenues and premiums. However, previous reports from the Temporary Work Organization, which oversees the country's financial packages, have already indicated that the situation is less rosy than the minister may lead the public to believe.
Delays in Collection
The IMF report states that there are no structured procedures for collecting tax arrears on time. Many taxpayers submit their returns late or fail to pay at all, with no consequences attached. The lack of a functional collection system means these arrears continue to accumulate without a clear strategy in place to address the issue.
Additionally, the report points out the absence of a systematic analysis of the tax gap, the difference between expected and actual tax revenue. Without insight into the extent of this gap, it is difficult for the government to implement targeted policies and ensure a stable revenue stream.
Lack of Penalties
The report further notes that while penalties exist for late payments, they are not consistently enforced or collected. This lack of enforcement creates little incentive for taxpayers to pay on time. Additionally, there is a weak connection between the tax authority and the Ministry of Finance, leading to a lack of real-time oversight of tax revenues.
The IMF stresses that improving tax collection is crucial for the financial stability of Curaçao. Without reforms, the government will continue to rely on external loans, which could make it more difficult to fund public services. The Ministry of Finance has previously indicated that it is working on a reorganization of the tax authority to address these challenges.