The Turks and Caicos Islands will implement a value added tax at a rate of 11 per cent from 1 April, 2013. The VAT rate, which is the second lowest in the Caribbean, was contained in a White Paper released by the Interim Administration on Monday after weeks of stormy national debate and muscular opposition from the private sector to the tax, which government says will help restore fiscal balance and a sustainable economy and contribute to critical social development.
“Given the state of public finances, this government is not considering a delay in the implementation of value added tax, and therefore is fully committed to an implementation date for VAT of April 1st 2013,” the White Paper stressed.
The Turks and Caicos value added tax would replace several taxation laws that exist, including the hotel and restaurant accommodation tax, the vehicle hire stamp duty, the domestic financial service tax, the telecommunications tax and the insurance premium tax.
Britain has initiated direct rule in the territory since the ouster of former Premier Michael Misick’s government and the findings of a Commission of Inquiry that revealed a “high probability of systemic corruption” within Turks.
A 9 November date has been set for new elections.
VAT is now a common feature within CARICOM being already implemented in Caribbean countries at the following standard rates: Haiti 10 per cent, Dominican Republic 16 per cent, Trinidad & Tobago 15 per cent, Jamaica 16.5 per cent, Barbados 17.5 per cent, Dominica 15 per cent, Belize 12.5 per cent, Guyana 16 per cent, Antigua & Barbuda 15 per cent St Vincent & the Grenadines 15 per cent, Grenada 15 per cent and St. Kitts & Nevis 17 per cent.
There is no VAT in the Cayman Islands.
“This low rate (11 per cent) has been achieved by keeping the range of VAT zero rate and exempt items as limited as possible and has been set with the aim of not exceeding the present Accommodation Tax rate of 11 per cent, in order to avoid difficulties for TCI’s key tourism sector,” the White Paper stated.
In defence of its decision to proceed with the new tax in spite of raging opposition, the interim government said the VAT will deliver long-term improvements to the Turks and Caicos Islands economy.
These improvements, it was stated, will be reflected in increased investment and economic growth as a result of the removal of current market distortions, increased competitiveness, a strengthened investment climate and an increase in revenue. This should help ease the territory’s fiscal position.
As noted previously, the current indirect tax system has a number of features which creates distortions and impedes economic growth, the White Paper added.