KRALENDIJK – The Central Dialogue (CD) has expressed extreme disappointment with the decision made by the Council of Ministers on August 23 to approve the proposed changes to the 2025 tax plan for the Caribbean Netherlands. According to the CD, this decision ignores the well-founded advice provided by the CD and the three Public Entities regarding this plan. Moreover, the decision contradicts the Kralendijk Agreement, which the CD established in 2021 and which was embraced by the previous cabinet as a framework for combating poverty.

On June 27, the CD received the concrete proposal with a request to respond, after the CD had already urged in previous discussions not to implement tax increases for businesses due to the significant rise in the minimum wage (WML) this year.

Both the CD and the three Public Entities responded with negative feedback. The main concern was that this bill does not affect the wealthy but rather hits small businesses and middle-income earners. At a time when the WML is significantly increasing, the CD considers it highly unwise to implement these changes without a thorough analysis of their effects.

The key issue was that by lowering the threshold for the second tax bracket to $50,000, it would mainly impact middle-income earners, the group identified in the Thodé Commission report as being on the brink of what they need to make ends meet. In addition, the requirements for the customary wage, the wage that an entrepreneur is expected to pay himself at least, are being further tightened, particularly for entrepreneurs who currently have a wage below the standard amount because they perform work for which lower wages apply on the labour market than the standard amount for the customary wage. This could, for example, be an entrepreneur with a small cleaning company, who also works as a cleaner on a daily basis. In the CD’s view, it’s unprecedented that there is no indication that the well-reasoned responses from the islands were taken into account. It appears that the input was requested merely as a formality and not seriously considered.

Thorough Analyses Needed

In recent years, the CD has repeatedly tried to engage with the Ministry of Finance on the tax system and its long-term viability. The CD has explicitly stated that addressing income inequality, for instance by increasing taxes from a certain income level, is certainly open for discussion. However, the advisory body insists that such measures should be based on thorough analyses and not on hasty and unrefined actions. For example, further investigation should be conducted into the causes of income disparities in Bonaire, and those causes should be addressed. The CD points out the high percentage of low-skilled workers in Bonaire (52%, compared to 25% in the European Netherlands). Adjusting a tax bracket won’t solve this problem.

Specific Measures Required

The CD has also advocated for years, both to the Ministry of Finance and to BZK and SZW, for specific rather than generic measures. A tax-free allowance applies to everyone and is therefore a generic measure. However, it isn’t necessary for higher-income individuals. If this were a specific measure, such as an income-dependent employment allowance (a tax credit that only applies to workers up to a certain income level), it would be much more effective. Nothing has been done with this proposal.

Over the past few years, the CD has also advocated for a responsible increase in the WML and a reduction in costs to combat poverty. When a significant increase in the WML was decided at the end of 2023, the CD urged SZW and BZK to provide targeted support to businesses and to monitor the economic impacts. Both initiatives have not yet gained much traction. The CD also called for halting further measures that would increase costs for businesses. The CD can only conclude that ministries are working at cross-purposes without proper coordination.

The CD urges the Ministry of Finance to immediately review these plans, consider the input from the islands, and engage in discussions with the CD about the future of the tax system. “Until the effects of the WML increase are clear, no tax changes should be implemented. Furthermore, future changes must always be accompanied by a careful assessment of their impacts, as is standard practice in the European Netherlands,” stated the CD.

Ill-Conceived and Harmful

The CD also calls on the Council of State and the Dutch Parliament to seriously consider the arguments of the islands and recognize that these measures are ill-conceived and harmful.

The Central Dialogue Bonaire is a local consultation platform that includes the Public Entity, unions, employer representatives, and the Chamber of Commerce. The parties aim to contribute to a socially, economically, and ecologically sustainable Bonaire through consensus in the Central Dialogue. For more information: https://www.centraaldialoogbonaire.com