Government wants to close tax gap with withdrawal of Sales Tax
The government of Curaçao is advancing plans to replace its current sales tax system with a value-added tax (VAT) regime, marking a significant shift in the island’s fiscal strategy. The move is intended to enhance revenue collection efficiency, broaden the tax base, and modernise the nation’s tax system in line with international standards.
In doing so, it would join 175 countries with VAT.
In a public interview on 7 May 7 2025, Curaçao’s Minister of Finance emphasised the potential benefits of a VAT framework. The transition, he noted, would enable the government to improve tax compliance and reduce distortions caused by the existing sales tax, which currently operates with multiple tiers (6%, 7%, and previously 9%). However, the Minister also acknowledged challenges, including the regressive nature of consumption taxes. To mitigate the disproportionate impact on low-income households, the government is considering a monthly compensation scheme for minimum wage earners and other vulnerable groups.
While the timeline for implementing VAT in Curaçao remains under discussion, the combined momentum of international guidance, domestic political will, and institutional reform suggests that the transition is approaching a decisive phase. As the government continues stakeholder engagement and technical evaluations, VAT is being positioned not just as a tax change, but as a cornerstone of broader economic modernisation.
IMF support for modernisation of indirect tax
This initiative aligns with longstanding recommendations from the International Monetary Fund (IMF), which has urged Curaçao since 2022 to move beyond mere administrative adjustments to its sales tax regime and adopt a fully-fledged VAT system. In its 2022 Article IV report, the IMF stressed that VAT would reduce inefficiencies in the tax system and better support long-term economic growth. It also recommended removing provisions that allow taxpayers to reduce import tax liabilities on items already subject to sales tax.
In preparation for its 2025 Article IV review, the IMF has agreed to provide technical assistance to Curaçao, supporting reforms not only in taxation but also in public finance, healthcare, and pension systems. The collaboration is seen as a crucial step in bolstering investor confidence and demonstrating Curaçao’s commitment to fiscal responsibility.
“This collaboration is an important step in ensuring long-term economic stability,” said Finance Minister Javier Silvania during a working visit to Washington, D.C. “It reflects our commitment to responsible governance and transparent fiscal management.”
The IMF assistance will focus on improving debt sustainability, public investment efficiency, and tax administration modernization—all of which are critical for the successful implementation of VAT. Drawing on lessons from regional counterparts like Sint Maarten, the IMF notes that coordinated tax reforms and IT upgrades are essential to reduce leakage and ensure compliance.
