Ready for the Smart Revolution? A Case for Economic and Fiscal Preparedness

We are on the verge of the next level of the “Smart Revolution”. How will this create new opportunities for us here in Curaçao and what challenges can we expect to see ahead? Fiscal economist and Senior Policy Advisor at the Ministry of Economic Development of Curaçao and guest lecturer of the University of Curaçao, Emauro Scoop, MSc, elaborated on this topic during a lecture held recently in the auditorium of the UoC.

So what is the “Smart Revolution”?
Google “Smart City” and you will be inspired by clever and creative technology-driven solutions that cities around the globe are implementing to improve livability, workability and sustainability for their citizens. Some cities lower their carbon emissions with citywide use of smart bicycles, while others help the elderly and disabled people by offering health check-ups and medical consultation through remote-controlled medical equipment and smart devices. So what does it take to make Curaçao the first “Smart Island” of the Caribbean? One thing is for certain: Smart technologies are changing urban lives, the economy and the way of doing business. They become a major economic driver. And a change in commerce means that, – in addition to the many other expected changes – our fiscal infrastructure needs to adapt accordingly in order to avoid pitfalls.

Why is it so exciting?
Smart technology has the potential to transform Curaçao completely, even down to an operational level. We can create a healthier, more sustainable, more educated Curaçao. As a result, new types of businesses will grow. We could even reposition ourselves on the world economy stage as we have done before in our economic history. The concept of smart cities doesn’t compete with existing efforts. Instead, smart city technologies can support and enhance work already underway.

Why be concerned?
As business interactions change we need to adapt our fiscal and tax systems.
• The distance of shopping will no longer be an issue, since e-commerce will make delivery to your door possible. But apart from unauthorized credit card access and misuse of corporate and personal information, governments are now struggling with tax origin and other fiscal issues.

Scoop used a simple example to illustrate this: You’re on a business trip in the Virgin Islands and during your break you decide to buy a few new shirts online. You use a credit card at the Amazon website, which then sends the shirts from a warehouse in Panama to your Shipper in Miami, who then ships them to Curaçao. Where would this transaction be taxed and import duties levied?

• Economic innovations such as Bitcoin and Digital Wallet also change the way we do business. This also brings some risk with it. We need a proper legal framework for businesses in this new digital economy, and attractive legal vehicles are necessary to stimulate companies in this industry. It is expected that e-commerce will cause 40% of traditional business to disappear in the next 10 years. For some businesses this will pose a serious threat. Others will see new opportunities and discover new niches arising from this change. Technology makes room for new applications and solutions and businesses need to reinvent themselves along the digital way.

• There is also the matter of BEPS, (Base Erosion and Profit Shifting). Scoop argues: “We need to have a lean and mean legal framework and a proper economic system to optimize our opportunities otherwise our own companies could be contributors of BEPS to our own Economy.” We need updated tax legislation in compliance with international regulations – corporate income tax, personal income tax, sales tax, and import duties should be levied on e-commerce transactions ‘received’ in Curaçao.

When do we start?
Two words: start now. The digital economy evolves continuously and at a high pace. It wasn’t long ago that we used our first cordless phone and now smart phones, mobile devices, wireless networks and sensors are the norm. To the younger generation there is no way back. It is not a question of IF this smart revolution will happen, but rather WHEN it will happen. Already we are seeing worldwide commerce changes that directly affect our economy. We need to start finding solutions to prosper from this wave of change. For this to happen the government can play a role in enabling the necessary facilities and in carving a path upon which Curaçao can evolve.

How do we start?
Scoop hopes that the Government will start a steering group to create a vision for Curaçao on how to deal with digitalization of our country and how to apply Smart Technology and innovation wherever needed in our system and our economy. Once we agree on how we’re going to use Information and Communication Technology to manage our assets such as schools, public transportation, government services, medical facilities, waste management, etc., to meet residents’ needs, it will become evident which legislation, incentives, taxes, and other fiscal and financial prerequisites will best serve Curaçao. He notes, “We need to come together and pool the knowledge and resources we have scattered throughout departments and start creating a bridge towards this future smart economy. And we have to act now. Technology moves fast and it gives us speed. I argue for transparency and integrity so that we can keep Curaçao ranking high on the global financial ratings. I believe we have to get back to our creativity and inventiveness. We have what it takes to build this bridge to what’s next on the digital economy frontier. Vision and leadership are key elements for success in this new challenge for Curaçao.”

Base Erosion & Profit Shifting, (BEPS):
Refers to tax avoidance strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations. Under the inclusive framework, over 100 countries and jurisdictions – including Curaçao – are collaborating to implement the BEPS measures and tackle BEPS.
This movement, and the regulations related are coordinated by the Organization for Economic Cooperation and Development, (OECD). The OECD helps governments tackle the economic, social and governance challenges of a globalized economy.

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