fp Turks and Caicos

Value-added taxes took one more step toward approval despite louder cries from groups opposing the tax or asking for more time to consider it.

The Advisory Council approved the VAT bill at its July 4 meeting, just two days after the interim government released a white paper detailing features of the tax for the public for the first time since consultation began in April.

However, council member Joseph Connolly resigned July 5 because he could not support the VAT bill in its current form and take more time “to assess its suitability to the islands,” according to a government press statement July 6.

The Consultative Forum will take up the bill at its next meeting before the government says the bill will be signed into law, launching VAT on April 1.

Various opposition groups say the consultation was not genuine because the decision to impose VAT was never on the table, which government readily admits. In fact, since European Union-funded consultants recommended in March 2011 that VAT would be a more stable and fair tax, government has said it would implement VAT in fiscal 2013-14, saying only that it would hold consultations about the details of the tax.

The Turks and Caicos Society of Architects Surveyors and Engineers (TCASE) presented a position paper explaining that on-island construction professionals would be hit with VAT while foreign competitors would not. TCASE suggested some alternatives, but it never got a response.

However, the white paper does say that imported services will be subject to VAT just as local services.

The Turks and Caicos Independent Business Council (TCIBC) , which includes representatives of nearly 200 mostly service businesses that will have to charge and collect VAT, says the tax is not necessary and will hurt the still ailing Turks and Caicos Islands economy. (Click here to see a letter from TCIBC)

While government says most prices will not go up, businesses such as lawyers, architects and air conditioning services will likely add up to 11 percent to their prices, said government Chief Executive Patrick Boyle, who is acting governor while His Excellency the Gov. Ric Todd is out of the country for several weeks.

VAT is proposed to be an 11-percent consumption tax that will charged on the value of imports and on the mark-up on goods and services supplied by one business to another or to the final consumer. Import duties will be reduced 10-15 percent, but VAT on imports will be calculated on the fully landed cost, which includes carriage, insurance, freight, 6-percent Customs Processing Fee and import duty. Import duty and CPF will continue to be calculated on the FOB value of imports.

In order to keep prices down, a large number of items will be exempt from VAT. Those include basic food items like rice, flour, sugar, milk and eggs, chicken, fish and meat, fresh fruit and vegetables; infant supplies, personal hygiene products, hurricane shutters, cement, steel, fuel, property leases, rents and strata fees, property sales where stamp duty is applied, medical services, transportation, religious services and printed materials.

Zero rated supplies, which are goods and services that will be taxable at zero percent, allow businesses to claim input tax credit on inputs used in making the zero rated supplies, including water, electricity and exports.

One complaint about VAT is that it is complicated, a fact that the EU consultants readily admitted. But government says the 400 businesses making more than $200,000 a year that will be subject to VAT should be able to handle the new tax.

Businesses already paying the 11-percent accommodations tax will have to pay VAT if they make more than $50,000 a year.

The Turks and Caicos Hotel and Tourism Association says it is not for or against VAT, but it wants more time and information to decide if it is necessary or good for the economy.

More on VAT

PNP opposes implementation of VAT - July 6, 2012

TCI Government response to the anti-VAT leaflet ‘How VAT Affects You’ - July 6, 2012

"No to VAT" group letter to Patrick Boyle, Neil Smith - July 6, 2012

"No to VAT" reply to the CFO's attack against the Turks and Caicos Business Council - July 4, 2012

“No to VAT” letter to Henry Bellingham, Andrew Rosindell - July 4, 2012

VAT White Paper - July 2, 2012

CFO response to TCIBC - July 2, 2012

TCIBC says VAT consulation is a sham - June 29, 2012

Turks and Caicos Hotel and Tourism Association on VAT - June 18, 2012

TCI United against VAT red paper - June 13, 2012