Impacts
– Resident Impact:
The high cost of living on St. Maarten seriously affects the quality of life of its residents. Increased costs of housing, utilities, food, gasoline, etc. and the high tax burden significantly reduce spending power.
– Business Impact:
Increased prices of labor, utilities, real estate, construction, etc. and the high tax burden increase the cost of doing business.
– Visitor Impact:
Because of the high cost of living and doing business St. Maarten has become a high priced destination, with a low cost to value ratio. This will negatively impact the visitor’s experience on St. Maarten.
Proposed Solutions
Reduce Taxes
1. Reduce Tax Rate
A reduction of the tax rate of income/wage tax as well as the profit tax will decrease the costs for residents and businesses and increase their spending power (calculate tax-burden).
2. Broaden Tax Base
A broader tax base spreads the burden of society over all residents and businesses. If all businesses and residents are included in the tax system and they are all paying their taxes accordingly, the burden is spread more evenly. This will also compliment the reduction in taxes to ensure government revenues will not go down.
3. Simplify Tax System
The tax system should be simple and easy to manage. Laws and regulations should be easily accessible and easy to understand. Furthermore tax payments should be centralized and less cumbersome.
Less Labor Costs
1. Decrease Acquisition Cost of Labor
The cost of acquiring new employees is significant. Reducing the time and cost of acquiring new employees also reduce the cost of doing business.
2. Flexibalize Labor Law
Increasing productivity of the labor force will reduce the cost of doing business. Better skilled and trained employees are able to operate more efficiently and produce more for the company in less time than someone who is untrained and inexperienced. This increase in productivity reduces the cost for the company, since one person is able to do more.
3. Increase Productivity
Removing the dismissal law will reduce the barrier for businesses to hire employees. Many companies are now hiring through subcontractors, at a higher fee, to reduce the risk of not being able to terminate a contract if necessary. This will result in a reduction of the labor cost, which can in turn stimulate investments leading to an increased demand of labor.
Lower Other Costs
1. Housing
Although in other countries such as the US and the Netherlands, the average housing cost is around 30%, most people on St. Maarten spend about 50% to 60% of their salary on housing. The cost of renting or owning a house on St. Maarten is significant. Real estate prices are up because of a lack of land available, an increasing population and increasing foreign investments. Because of the high real estate prices it has become very difficult for local residents to purchase a house or a lot.
2. Food
The cost of food on St. Maarten is perceived to be very expensive. With the range of products coming in from all over the world, St. Maarten does indeed offer almost everything. However, when compared to other economies, the products are still quite expensive. Most of the products used by businesses and residents in everyday life on St. Maarten have to be imported. Being able to produce more on island will reduce the import costs and therefore cost of living.
3. Utilities
The high cost of living on the island is also significantly impacted by the habits of residents. Actions such as leaving utilities (airco, tv, ceiling fans etc) on while they’re not being used are prime examples. By improving the way we go about our daily lives we can reduce the cost of maintaining a healthy lifestyle.
4. Healthcare
Healthcare costs are continually rising, medication as well as insurance (SVB premium up, benefits down) while some private insurers don’t insure citizens over the age of 60, shifting the burden on the residents and immediate family, and ultimately to the government. By using generic medications, some costs can be lowered, hopefully translating in a lowering of the insurance rate.
5. Transportation
The traffic and congestion on St. Maarten increases the cost of living and doing business. Less traffic and congestion helps to reduce the cost of fuel, which has experienced a major increase, and time spent in traffic. Improving the traffic situation will decrease delivery time and increase productivity. This will all decrease the cost of doing business and consequently decrease the cost for the consumer, and increase the quality of life for residents, and help provide a positive experience for visitors.
6. Education
With the disappointing results of the education system for the past years, many working parents have to spend more on the children’s education in order to be assured of a reasonable quality of education. Schools are overcrowded and under funded, teachers are underpaid and the quality of the education is decreasing.
7. Safety
Because of the high level of crime and the feeling of insecurity, businesses are forced to take measures to assure their safety. For example security personnel is hired to guard the property, expensive alarm systems are put in place, paying out salaries has become more cumbersome, etc. All these measures will increase the cost of doing business and therefore also impact the cost of living by increased prices.
For more solutions on reducing the Cost of Living, download the SHTA’s Cost of Living White Paper.
