fp Turks and Caicos

The imposition of value-added taxes continues to draw questions and opposition in the Turks and Caicos Islands, while the government says it finally will reveal its decisions on VAT on July 2.

A recently formed group calling itself the Turks and Caicos Independent Business Council (TCIBC) has taken the fight against VAT to the media, sending a statement to U.K. Chancellor of the Exchequer George Osborne.

“We send a clear warning to Chancellor George Osborne that we represent the interests of all the leading businesses in the country, and indeed it can be said that our views are representative of virtually every business concern,” the group said in a June 26 statement.

The council, led by Queens Counsel and businessman Clive Stanbrook, said it will reveal its membership during the week of July 2 to show its wide range of support.

The group says it is prepared to do whatever necessary to stop the implementation of VAT in the country.

“This new VAT tax is not driven by a ‘grass roots’ initiative, but is a politically driven tax imposed upon us by distant bureaucrats based in Europe without effective due process and regard to our specific economy and its future development,” the group said. “One size does not fit all.”

“We are sending a clear message to the British Government,” Stanbrook said. “It is the view of virtually the entire business community in the Turks and Caicos that a VAT tax is inappropriate, costly, cumbersome and unnecessary at this stage in the development of these islands,” Stanbrook stated. “In the short term it is clear that the existing taxation systems can be relied upon to raise such extra revenue as may be needed.”

His Excellency the Gov. Ric Todd responded Tuesday during a media briefing, saying that while he respects everyone’s right to express their opinions, “the decision to take on VAT has been made.”

In fact, the legislation that will set VAT into proverbial stone is planned to go into law in roughly two weeks. On July 2 the VAT White Paper is expected to be published, following eight weeks of consultation period that officially ended June 19.

The government announced June 27 that White Paper will include finalized decisions on all the issues which were listed for consultation in the Green Paper:

• VAT rate
• registration threshold
• exempted and zero rated imports and supplies
• refunds
• accounting records
• returns and simplified issues
• sector considerations
• social and economic impact
• transitional issues

The proposed legislation is expected to mirror the decisions of the White Paper. It will first be released as a draft to Advisory Council and Consultative Forum members July 2 and passed into law July 13. It will take force April 1, 2013, which is the intended implementation date.

The VAT Implementation Team will begin its public education campaign after it passes into law, including advisory visits with proposed registered businesses, to provide extensive education, technical assistance as needed and advise them of their obligations under the proposed legislation.

According to the government, the consultation involved a total of 14 public meetings, and 16 focus group meetings across the islands. They also accepted position papers from various sectors and say those concerns were noted for appropriate treatment in the VAT ordinance and regulations.

Anti-VAT campaigners argue the tax will hurt the economy and increase prices. Some argue it will put some service businesses at an unfair disadvantage against outside firms who won’t pay the tax.

Government says implementing VAT will create a broad, stable tax base. Service businesses such as lawyers and contractors who don’t pay tax on their sales, plus businesses that got big customs duty and fee concessions, having to pay VAT. It is claimed that customs duty will go down and that consumer prices should not increase.

The government is basing its decision on studies such as one by economist Alan Roe who in 2010 said the current reliance on customs duty, accommodations tax and land sales tax that failed the country when the worldwide recession hit would not be the best choice for the future, as some opponents are claiming.

A European Union report in February on the TCI’s finances applauds the move to VAT as a step toward getting millions in EU grants for the TCI that have been frozen since government was suspended in 2009. The interim government has made good progress over three years to correct a long history of inadequate government financial standards which could result in resumed EU funding, according to the report.

Last week the Turks and Caicos Hotel and Tourism Association said in a statement it believed VAT needs more study and more time for implementation. It’s not for or against VAT, but it’s not convinced it is necessary or good for the economy.

The TCIBC said it has collected more than 3,000 signatures of those in the community who oppose VAT.

“This is not a done deal as many think,” the group said. “No government or administration can impose any policy upon a community if that community refuses to accept the policy.”

It is unclear whether the group’s plea to Osborne will make any difference. The chancellor is responsible for tough U.K. budget measures, which include increased taxes, billions of pounds in spending cuts and hundreds of thousands of public sector job losses.

Click here to read the EU Preliminary Assessment of the Public Finance Management and of the Economic Situation in the TCI

Click here to read the government's question-and-answer on VAT

Click here to read the TCASE position paper

Click here to read the TCI United against VAT Red Paper

Click here to read the Bishops Legal law firm synopsis

Click here to read the Alan Roe Revenue Study 2010

Photo: Clive Stanbrook