GREAT BAY--Minister of Finance Marinka Gumbs announced during the continuation of the 2026 Budget debate on Monday that Government is preparing changes to the tax system that could provide significant relief for persons receiving AOV.
One of the planned changes would remove AOV payments from the income used to calculate a person's income tax. Government is also drafting legislation that would mean persons whose only income is AOV would no longer have to file an income tax return.
AOV stands for Algemene Ouderdomsverzekering, or General Old Age Insurance. It is St. Maarten's statutory old-age pension system, administered by SZV, which provides a monthly pension to persons who qualify based on the years they were insured under the system.
Gumbs repeated during the debate that under the proposed change, AOV itself would no longer count as taxable income.
In practical terms, someone who receives only AOV would no longer be required to file income tax based on that pension. If a person receives AOV as well as income from another source, Government would only look at that additional income when calculating income tax.
For example, if a pensioner receives AOV together with income from employment, rental property or another taxable source, the AOV portion would be left out of the income tax calculation.
The measure forms part of a broader tax reform that Government intends to introduce in phases beginning in 2027.
Gumbs explained that Government's first priority under the reform will be to improve revenue collection. The intention is to strengthen the amount of money actually coming into Government before introducing further tax reductions.
The Minister said the approach is essentially to first improve Government's ability to collect what is owed and generate more revenue, after which there will be greater room to reduce the tax burden, including for the elderly.
The phased approach also forms part of a wider renewal of St. Maarten's tax system.
Gumbs also told Parliament that Government, working with CARTAC, has developed what she described as a smart operational collection plan to improve the collection of outstanding taxes.
Put simply, rather than trying to chase every old tax debt at the same time, the Tax Administration would place greater attention on newer debts and larger amounts that are still outstanding.
The aim is to focus Government's collection efforts where there is a better chance of recovering money more quickly and bringing that revenue into Government's coffers.
Government also intends to move some taxes toward a self-assessment system.
Under such a system, taxpayers would have greater responsibility for declaring and calculating what they owe, rather than waiting for Government to first determine the amount through an assessment. The Tax Administration would then focus more heavily on checking declarations, ensuring compliance and taking action where taxes are not properly reported or paid.
The objective, according to Gumbs, is to make tax collection faster and more efficient while improving compliance.
For AOV recipients, the proposed reform could be one of the more immediately understandable changes emerging from Government's wider tax reform program.
A pensioner living solely on AOV would no longer have to go through the process of filing an income tax return because of that pension income alone.
Those who continue working or receive another form of taxable income would still be required to deal with income tax where applicable, but their AOV pension would no longer be added to that income when determining what they owe.
The Minister indicated that legislation to make the changes possible is being drafted as Government prepares for the phased introduction of tax reform and tax system renewal beginning in 2027.
