Aruba is currently facing a challenging housing situation. Houses are becoming increasingly expensive, and there has been a shortage of land to build new houses for some time now. During the Forum organized by Minister Ursell Arends, it became clear that there is a proposal on the table to introduce a tax when foreigners (tourists) purchase houses that are later turned into vacation rentals (Airbnb). We asked the director of the Tax Department (DIMP), Luenne Gomez-Pieters, about how the tax department views this possibility.
DIMP sees this issue as a concern for them as well. “We see that the revenue from transfer taxes is increasing much more rapidly than in previous years.” This was a sign they were noticing, as they collect taxes and if these taxes increase, it reflects on what the cost is increasing. DIMP’s plan is not just about fiscal incentives, because through taxation you can either facilitate economic activity or discourage certain consumption or use of certain things. For example, if you consider raising excise duties or import duties, it’s to try to discourage the use of alcohol, cigarettes, etc. With an increase in tax rates, you can deter some of the behaviors that are currently being observed.
At the end of the day, in 20 to 30 years, you would want your citizens to have a home, including our young people who are studying. This is something that DIMP receives feedback on and has on its agenda to address.
When buying a house, every notarial deed incurs a transfer tax. The question is where this possible increase for foreign buyers of houses will fit in. According to DIMP, it will also fit within the same transfer tax, so as not to discriminate. “To avoid it seeming just because you’re a foreigner, you pay a higher rate. Instead, a rule comes into play that raises taxes for a second home, regardless of who buys it. This is another way to tackle this issue.”
This is included in the same transfer tax where the rates will be different for a second home. There, we’re not talking about introducing or making a new tax based on the value of the purchased house; this is within the existing tax, and we’re looking at how to address this. We’ll have to measure later if it has its effect as well because not everything has the calculated effect sometimes. It’s a matter of introducing a change in the law and also measuring its effect, which is expected to happen, according to the director of DIMP.
