WILLEMSTAD – Introducing a tax on international financial transfers in Curaçao without a similar measure in Sint Maarten could make Curaçao-based businesses less competitive and weaken investor confidence, according to a new economic analysis.
The report argues that even a modest levy of between 0.5 and 1 percent on international payments would increase costs for local businesses importing goods or paying foreign suppliers.
Companies operating from Sint Maarten, where no comparable tax would exist, would avoid those additional expenses, potentially allowing them to offer lower prices and win contracts over competitors based in Curaçao.
Analysts also caution that unequal taxation within the monetary union could create broader financial consequences. Significant shifts in deposits and transactions from Curaçao to Sint Maarten could alter banking balances and place additional pressure on the Central Bank of Curaçao and Sint Maarten (CBCS), which is responsible for monetary policy in both countries.
Beyond the direct financial effects, the report suggests that foreign investors and correspondent banks could begin to view Curaçao as a more expensive and administratively burdensome place to conduct business than Sint Maarten, potentially discouraging investment.
The analysis concludes that unilateral taxes on capital flows generally do not function effectively within a monetary union with free capital movement.
Using a simple analogy, the report compares the situation to "two houses sharing one front door." If one homeowner charges an entrance fee while the other does not, visitors will naturally choose the free entrance.
For that reason, the report argues, measures affecting capital movements are typically introduced only when all members of a monetary union adopt them simultaneously or when compensating agreements are put in place to prevent competitive distortions.