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Turks and Caicos ministers at odds over VAT and alternative tax plans
Published on March 6, 2013 Email To Friend    Print Version

By Caribbean News Now contributor

PROVIDENCIALES, Turks and Caicos Islands -- Turks and Caicos Islands (TCI) finance minister Washington Misick, who remained withdrawn from public appearances for a two-week period, reappeared last week and appears to be in disagreement with Premier Rufus Ewing on the reasons behind the shelving of value added tax (VAT).

Misick, speaking on local television, said that the freezing of VAT is obviously the result of chief financial officer (CFO) Hugh McGarel-Groves and his department not being prepared to implement the tax on April 1 as scheduled.

Misick appears to have come to this conclusion from the questioning of McGarel-Groves and the permanent secretary of finance by the chair of the Appropriations Committee, opposition leader Sharlene Cartwright-Robinson, and other members of the committee.

At that meeting, McGarel-Groves said that, despite not yet purchasing the required software, he would be able to begin collection of the tax on that date but would have to take another approximately 90 days to fully implement the system to run the new and complicated tax system. Shortly after the meeting, McGarel-Groves was summoned to London, along with Governor Ric Todd.

When Misick was asked the cost of running the VAT program, he said, “I do not know off the top of my head.”

However, at the Appropriations Committee meeting it was revealed that the software and training was scheduled to cost $500,000 and that 22 employees had been hired to operate the VAT system. In addition, a commissioner’s job was also being advertised for hiring. Misick nevertheless appeared to be aware of the 22 new employees and said he could use these employees to collect taxes remaining unpaid. It is uncertain what these taxes are.

One example of such unpaid taxes could be the 8 percent national insurance retirement contributions, which Trevor Cooke, the national chairman of the Progressive National Party (PNP), said TCI people could not afford to pay. On two occasions the names of persons in arrears on this tax have been published, listing known supporters of the PNP.

Ewing has in the meantime taken a different course, trying to convince islanders that his letters to Britain’s Overseas Territory’s Minister Mark Simmonds, twice rejected, caused the delay. Ewing also said that his recent speech to Caribbean Community (CARICOM) heads of government resulted in their backing of the freeze of VAT. However, there have been no public or reported private statements by CARICOM or its member states along these lines. In fact, several CARICOM member countries either already have VAT or are thinking of implementing it.

According to statements by Governor Todd and by the content of the Simmonds letter, cuts in government spending and/or new revenue must replace VAT. This has been confirmed by the minutes of recent cabinet meetings.

However, Misick now says that public expenses can remain as before despite, in an earlier press statement, anticipating the hiring of between 236 and 250 new civil servants. The difference is now revealed to be the additional VAT employees.

Misick has also reconfirmed his promise to go forward with a number of new taxes that will add to the already heavy taxes begun under the previous PNP government, which began taxing gasoline, raising vehicle registrations and business licences. These taxes were further raised by the interim government and the addition of a handling charge for customs duty. This was later revealed by Todd to have been an effort to overcome duty concessions granted to existing resorts by the former PNP government.

According to the Simmonds letter and Todd, two issues were behind the implementation of VAT. One was the need to pay down and eliminate the $260 million consolidated loan guarantee arranged by Britain. This has to be accomplished within the next three years.

The second financial issue remaining unaddressed either by the interim government or the new Ewing government is the tremendous cost of health care. This includes the hospital mortgage, the cost of primary care and the 25-year contract for secondary care to Canadian firm InterHealth Canada.

The PNP government, if it survives a by-election of March 22, must now produce a financial policy statement to resolve these disagreements and then, according to Todd, must expedite budget proposals for two financial years -- April 1, 2013 to March 31, 2014, and April 1, 2014 to March 31, 2015. These statements must reflect surpluses adequate to pay down the financial obligations left by the previous PNP government.
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