|VAT signed into law||| Print ||
|Written by Richard Greenemail@example.com|
|Thursday, 19 July 2012 11:46|
Acting Gov. Patrick Boyle signed value-added taxes into law July 19, accepting several suggestions from the Consultative Forum and pledging to make more changes before VAT is implemented in the Turks and Caicos Islands on April 1.
Agreeing with suggestions made at the forum meeting July 12, Boyle said government will:
However, the Insurance Premiums Sales Tax that was to be replaced with VAT will continue at 2.5 percent but be exempt from VAT, which is a lower rate than the 11-percent VAT.
“I hope that everyone who took part in this debate can put their differences of opinion behind them to help make the implementation of VAT as successful as possible,” Boyle said.
While five members of the forum voted in favor of implementing VAT, five others abstained because they had too many questions about the details or want it decided by an elected government.
By far the biggest concern at the forum’s July 12 meeting was whether the new tax planned to take effect April 1 will increase prices on most things affecting the “average man in the street.”
Government claims that most prices should not go up because of duty reductions and an increased number of exempt items, but it has conceded that service businesses which will have to charge and collect the 11-percent tax will result in some higher prices for consumers.
Businessman Clive Stanbrook, chairman of the newly formed Turks and Caicos Independent Business Council of nearly 300 businesses, assured members that prices would go up.
Nick Haywood, an accountant with PricewaterhouseCoopers Ltd., said VAT will create more business expense that will be passed on to customers. He questioned the wisdom of increasing costs for businesses and government to implement a tax that will generate the same amount of government revenue as the current system, which is what government predicts.
Architect John Redmond said VAT will destroy the simplicity of doing business in the TCI and hurt the economy by reducing inward investment. He also believes the $200,000 threshold for having to collect VAT is too low for small contractors and will harm the industry.
Turks and Caicos Hotel and Tourism Association Executive Associate Stacy Cox said her group, which employs more than 50 percent of the population, thinks VAT will increase costs and that tourists will spend less. She also said the 11-percent VAT rate will likely be increased soon because of non-compliance and other factors.
Ken Adams, owner of Building Materials Ltd. Do It Centers, said businesses won’t pay VAT, consumers will. He estimated increased prices of 4-6 percent, which in the case of his business would increase the cost of construction.
Some forum members wanted to know how the government intends to monitor price changes to see if businesses are increasing prices arbitrarily, suggesting price controls that currently do not exist.
Those speaking against VAT — including the Providenciales Chamber of Commerce — say the current government revenue stream that relies heavily on customs duty, accommodations tax and tax on land sales is sufficient, citing a small surplus in the 2012-13 budget and increasing revenues.
“The overwhelming view of the chamber is that implementation of VAT at this time would be an unnecessary, costly exercise, where simply making a few changes in the current system of collection may well suffice for an economy of our size,” Chamber President Tina Fenimore told the forum.
Government Chief Financial Officer Hugh McGarel-Groves said VAT is expected to provide a more stable source of income because it will spread taxes across most business sectors instead of relying heavily on a few. Government believes the future TCI economy won’t depend as much on tourism and construction as it has in the past, he said.
Permanent Secretary of Finance Anya Williams noted that government suffered an 8-percent revenue loss in first part of 2012 because of unforeseen events like the strike by firefighters at the airport and the norovirus outbreak at resorts on Providenciales.
Rev. Courtney Robinson, one forum member who abstained from voting, said it appeared to him that mostly businesses were objecting to VAT. He said “the small man” has told him they believe that VAT won’t affect them much.
At the beginning of the day-long meeting, forum Chairwoman Lillian Misick described the VAT debate as “mostly business people acting like British colonists and government officials acting like British tax collectors in what is playing out as round two of the Boston Tea Party. But conspicuously absent from their debate, or media war as it is turning out to be, has been anyone representing the interests of the ordinary citizens and residents of this country.”
She said residents who were siding with the anti-VAT business community have reversed their position after learning of the taxes VAT would replace and the list of exempt items.
Government says VAT will replace the hotel and restaurant accommodation tax, vehicle hire stamp duty, domestic financial service tax and telecommunications tax. Water and electricity will be zero-rated.
“This is not a businessman’s issue,” Stanbrook said. “It’s not the business that actually pay it, it’s the consumers that pay this.”
Stanbrook also accused the interim government of violating due process — bordering on contempt — for the rapid manner in which it is pushing through the VAT legislation without waiting to let an elected government decide.
But forum member John Philips said businesses have waited far too long to object to VAT, which has been proposed since March 2011. “That ship has sailed,” he said, adding that businesses should have contributed more to how VAT should be implemented.
Misick pointed out that the VAT green paper has been public since April and the white paper since July 2. She dismissed as a “mischievous perversion of the public debate” the claims that people don’t know what is being proposed.
Opposition also has come from appointed members of the interim government.
Joseph Connolly — managing director of PricewaterhouseCoopers Ltd. — resigned several weeks ago from the governor’s Advisory Council in opposition to VAT.
On July 16, council member Edith Cox — finance manager of Graceway IGA of which Stanbrook is a shareholder — resigned in opposition to VAT. She said she also opposed the law that puts the government’s chief financial officer in almost complete control of government finances until the U.K.’s $260 million loan guarantee is assumed by the TCI — perhaps until 2016.
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