| Draft revenue study released to public | | Print | |
| Thursday, 25 February 2010 13:33 | |||
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The study conducted by U.K. economist Alan Roe concluded — perhaps surprisingly to some — that the Turks and Caicos Islands is not a “low tax” economy. “In fact the ratio of total taxes and fees collected in recent years to the country’s gross domestic product has for some time been above the average among Caribbean tax jurisdictions,” Roe concluded. He described the country’s income as an “unconventional” mix of “high rates of import duties, stamp duties, high fees on work and residency permits and sector specific indirect taxes mainly on hotels and restaurants.” “The central question for this report is whether this is the best way to raise any given amount of revenue for the future,” Roe said. “There is no evidence from the statistics themselves … that there is a revenue problem additional to that induced by the large fall in GDP in 2009 and 2010,” Roe said. Because of that fact, many of those whom Roe consulted for his study claimed that there was nothing wrong with the current revenue system, but he warns that revenue will not improve unless the condominium boom through 2007 returns to that level. The report attempts to point the way toward a more stable and equitable system of revenue that would not rely so heavily on constant growth. The top priority for improving revenue is revising the duty system to eliminate duty exemptions, equalize duty on similar items and reduce duty on many key goods, the report states. A study on reforming customs duty is expected to be completed shortly, according to Roe. The biggest problem with customs duty is exemptions. In 2008-09 alone, duty exemptions lost $57.8 million in government revenue — a full 20 percent of that from exemptions for automobiles. Roe says typical tariffs could be reduced by 10 percent if duty exemptions were mostly eliminated. The report suggests the duty system could be more fair and helpful. There are no protective duties for items that could be produced locally, which punishes smaller businesses, the report says. And it notes a shocking disparity in duties, such as duty on coffee that is much higher than tea, and duty on roofing materials that is twice that of gutter pipe. When it comes to taxes, Roe says no new taxes should be imposed without much more study and consideration. Even then, he says that personal income taxes and corporate taxes should not be strongly considered. The report does suggest the creation of excise taxes on alcohol, tobacco, fuel oils and cars with larger engines to boost revenue. The system of fees and charges should also be reorganized to increase licensing charges by the Financial Services Commission; registration for births, marriages and deaths; land survey fees; naturalization and registration fees; and visas. Stamp duty accounted for more than 20 percent of revenue in 2008-09, but it is too susceptible to economic downturn. One suggestion is that stamp duty be revised to allow payment over six years instead of payment in full at the transaction. In the future, the government could consider replacing stamp duties with property taxes on land, residential property or commercial property. Also in the long term, customs duties could be eliminated with a value added tax system on larger companies only, or revised duties could be supplemented with a general sales tax. The report said that work permit fees are not equitable but could be collected as a tax to provide more revenue. Work permit fees could be eliminated, and the National Insurance Board could collect taxes from permit holders on a regular basis that are linked to the dollar value of their earnings. Click HERE to read the complete report.
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