CONTINUEThis site uses cookies. By continuing to browse this site you are agreeing to our use of cookies. Find out more.
  1. Front Page
  2. News By Topic
  3. IMF Urges Aruba To Consider VAT

IMF Urges Aruba To Consider VAT

by Philip Morton, Investors

13 August 2013

The International Monetary Fund (IMF) has appealed to authorities in Aruba to draft immediate corrective measures to counter the rising deficit, potentially through the introduction of a value-added tax.

The International Monetary Fund reported that the deficit grew to 8.5 percent of gross domestic product in 2012. Part of the deterioration was attributed to the Government's decision to halve the business turnover tax rate, to 1.5 percent, to support an economic recovery, but it was also due to the rising public sector wage bill.

Urging measures to immediately broaden the tax base, the International Monetary Fund highlighted that the public sector wage bill now accounts for 74 percent of tax revenues. Aruba's tax base, it pointed out, captures just 7.9 percent of the territory's gross domestic product.

It recommended that the Government could begin tackling the deficit through public sector retrenchment, and through substantial increases to taxes. This could be achieved by increasing the business turnover tax (which, at 1.5 percent, is the lowest consumption tax rate levied among its peers) and excise taxes and import duties, or through adopting a value-added tax designed to fit Aruba's specific needs, it suggested.

"Near-term measures could include raising the rate of the turnover tax (BBO) back to its original level of 3 percent and increasing excise taxes, thus contributing substantially (up to 3 percent of GDP) to the consolidation efforts," the Fund continued.

Responding to the IMF's report, the authorities said that increasing the turnover tax would not be possible but agreed there is scope to increase import duty rates, excise taxes and levies.

The IMF reinforced the importance of laying out a rigid fiscal consolidation plan, and if the need for a value-added tax is agreed, authorities should begin efforts towards implementing the regime immediately given that this program will require significant technical assistance and preparatory time.

TAGS: VAT rates | tax | business | value added tax (VAT) | fiscal policy | public sector | budget | Aruba | import duty

To see today's news, click here.


Tax-News Reviews

Cyprus Review

A review and forecast of Cyprus's international business, legal and investment climate.

Visit Cyprus Review »

Malta Review

A review and forecast of Malta's international business, legal and investment climate.

Visit Malta Review »

Jersey Review

A review and forecast of Jersey's international business, legal and investment climate.

Visit Jersey Review »

Budget Review

A review of the latest budget news and government financial statements from around the world.

Visit Budget Review »

Stay Updated

Please enter your email address to join the mailing list. View previous newsletters.

By subscribing to our newsletter service, you agree to our Terms and Conditions and Privacy Policy.

To manage your mailing list preferences, please click here »