The Turks and Caicos Islands agreement to implement a value-added tax to help shore up its government’s financial position has been held in abeyance by Mark Simmonds, the United Kingdom’s minister for the overseas territories.
Mr. Simmonds on Monday agreed not to implement the tax on its scheduled date of 1 April, as long as certain terms were met by the Turks and Caicos Islands government.
First, without revenues from the VAT, the government would be required to adjust its budget plans. This would include “the uncertainty about alternative revenue streams and the weakening outlook for some existing revenue streams set out in third quarter fiscal forecasts”.
“[The Turks government] will need to bear in mind that an approved Financial and Strategic Policy Statement is required before its budget can be agreed for 2013/14 [next year] so there is some urgency,” Mr. Simmonds wrote.
In order not to implement the VAT tax, Mr. Simmonds stated that he would instruct Turks governor Ric Todd not to sign the commencement notice for the new tax. However, such a move would leave the VAT law on the books.
“I will instruct my team to monitor the financial situation very closely,” Mr. Simmonds said. “I cannot and will not allow a reversal of the progress that has been made by the interim government.” Both the ruling government and the opposition political party in Turks have voiced strenuous objections to the implementation of the VAT.
The UK has required that the Turks government obtain the ability to refinance its debts without a UK loan guarantee by 2016.
“[The Turks and Caicos] will … need to take steps to constrain expenditure within the legal binding framework,” Minister Simmonds wrote. “It is still our view that VAT would provide a fairer, broader and more stable revenue stream, and that without this the burden of taxation will fall on a smaller number of businesses and households.”