WILLEMSTAD – A proposal for Curaçao to impose a tax on international bank transfers could unintentionally drive money and financial activity to Sint Maarten, economists warn, citing the unique structure of the monetary union shared by the two countries.
Since October 10, 2010, Curaçao and Sint Maarten have operated within a monetary union, sharing the Caribbean guilder and falling under the supervision of the Central Bank of Curaçao and Sint Maarten (CBCS). Capital is free to move between the two countries.
According to the analysis, if Curaçao were to introduce, for example, a 0.5 percent levy on outgoing international bank transfers while Sint Maarten did not, businesses and individuals could simply shift their banking activities to Sint Maarten to avoid the additional cost.
Such a move could reduce transaction revenue for banks in Curaçao while also lowering deposits and liquidity in the island's financial system.
The report also warns that companies may establish entities in Sint Maarten to route international payments through banks there before sending funds overseas. In that scenario, Curaçao would receive little or no additional tax revenue while still facing higher administrative and enforcement costs.
The analysis argues that this type of tax is difficult to implement successfully within a monetary union that allows unrestricted movement of capital. Without coordinated action between both countries, financial flows could simply migrate to the jurisdiction where costs are lower.
The issue has gained attention following Finance Minister Charles Cooper's recent announcement that the government is considering new revenue measures, including an entry tax for visitors. Although no official proposal for an international transfer tax has been announced, economists continue to debate possible alternatives for increasing government revenue without undermining Curaçao's competitiveness.