WILLEMSTAD – Curaçao’s long-standing use of tax holidays to attract foreign investors will come under closer scrutiny as the Central Bank prepares new research into whether those incentives still make economic sense.
The Centrale Bank van Curaçao en Sint Maarten says it plans to examine the fiscal and economic impact of investment incentive schemes, including tax holidays, as part of its public finance research agenda.
Tax holidays have traditionally been used to attract foreign direct investment and stimulate new sectors.
But the CBCS says there is little empirical evidence on whether these incentives remain effective in mature markets like Curaçao.
The central bank wants to assess whether the fiscal cost of these incentives outweighs their economic benefits.
The research will also examine whether the design, duration and eventual phase-out of such tax incentives should be adjusted.
The issue has become increasingly relevant as Curaçao tries to strengthen public finances while remaining attractive to investors.
The CBCS says improving tax compliance and broadening the tax base are critical to long-term fiscal sustainability.
At the same time, the bank is studying the so-called “tax gap” — the difference between what should be collected in taxes and what is actually collected.
Together, the findings could influence future tax policy and investment strategy in Curaçao.