PHILIPSBURG:--- In the ongoing debate surrounding the 2025 budget, Minister of Finance Marinka Gumbs addressed the concerns and misconceptions regarding the introduction of the Dividend Withholding Tax (DWT). The Minister emphasized that this is not a new tax but rather a mechanism to improve compliance and ensure fairness in the tax system.
What is the Dividend Withholding Tax?
Minister Gumbs explained that the DWT is a withholding mechanism, similar to the wage tax system, designed to collect taxes on dividends at the point of distribution. Under the current system, individuals who receive dividends are required to declare this income in their annual tax returns. However, compliance has been inconsistent, particularly among foreign shareholders.
“The proposed dividend tax legislation does not introduce a new type of tax but rather changes the timing and method of collection,” the Minister stated. “Instead of the individual being responsible for reporting and paying the tax at the time of their annual income tax filing, the responsibility will partially move to the company, which will withhold the tax at the moment the dividend is paid out.”
This shift ensures that the government receives revenue immediately, strengthening the country’s liquidity position and reducing the risk of underreporting or non-payment.
Why Now?
The Minister acknowledged that the timing of the DWT’s implementation has raised questions, particularly as Sint Maarten continues to recover economically. However, she emphasized that the measure is crucial for enhancing compliance and generating revenue to support future tax reductions.
“People living and working in Sint Maarten contribute faithfully through their wage taxes,” she said. “At the same time, individuals living abroad benefit from dividends earned by companies operating here—companies powered by the hard work of our people—yet they don’t always pay their fair share. This measure is meant to correct that imbalance.”
Impact on Local and Foreign Shareholders
One of the key concerns raised by Members of Parliament was the potential impact of the DWT on local businesses and residents. Minister Gumbs clarified that local shareholders are already required to pay taxes on dividends under the current system. The DWT ensures that this tax is collected upfront and credited against the taxpayer's income tax liability.
“For local taxpayers, this amount will simply be credited in their income tax filings, similar to how wage tax withheld by employers is treated,” she explained. “This approach increases compliance and fairness without creating any new burden for local taxpayers.”
The Minister also highlighted the challenges of collecting taxes from foreign shareholders, who often have limited ties to Sint Maarten and may leave the jurisdiction shortly after receiving dividends. By implementing withholding at the source, the government secures revenue upfront and significantly improves compliance.
Stakeholder Consultations and Public Outreach
Addressing concerns about the lack of consultation, Minister Gumbs noted that stakeholders were engaged during the tax reform process in 2022. However, she acknowledged that more could have been done to communicate the details of the DWT to the public.
“I acknowledge that raising the issue on the floor of Parliament may not have been the most ideal approach,” she said. “However, we learn and grow from experience, and I remain committed to transparency and improved communication moving forward.”
The Minister also announced plans for public outreach initiatives, including the distribution of brochures, explanatory videos, and town hall sessions, to ensure that the population and business sector are well-informed about the DWT.
A Step Towards Fairness and Sustainability
In closing, Minister Gumbs reiterated that the DWT is a step towards creating a fairer and more sustainable tax system in Sint Maarten. By ensuring that all who benefit from the country’s economy contribute their fair share, the government can generate the revenue needed to support critical projects and reduce the tax burden on residents.
“This is not about adding a new burden on locals; it’s about ensuring fairness and equity in our tax system,” she said. “It is time for action, not just discussion. If someone is benefiting from the profits generated in Sint Maarten, it is only fair that they also contribute to Sint Maarten.”
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