VAT Discussions in Turks and Caicos.PNP Government against VAT

FORMER PNP GOVERNMENT WAS NEVER IN SUPPORT OF VAT

By Floyd Hall – Former Minister of Finance
Published in SUN TCI

It is most gratifying to see that the two political parties and the business community have finally gotten together to unify around a common cause in the best interest of the people of the Turks & Caicos Islands.

Sadly though, it seems as if it has taken the British Governor and the FCO stepping on the toes of some people or some groups directly before they could appreciate the gross injustice that has been meted out on this beautiful country before unified action is taken. Having said that, it is a good thing that we have achieved some modicum of cohesion, even if this may only be for the benefit of some business owners’ personal self-interest.

However, I wish to address a point that is dear to me and my former colleagues in that the former PNP administration is being misrepresented by Neil Smith in the Governor’s Office as it relates to his comments on VAT.

In Mr. Smith’s statement to the press on 15 January 2013 addressing the implementation of VAT, he stated that the former PNP Government was in support of VAT. That statement is completely false.

While it is the case that the former PNP had agreed to explore the option of selecting one of four taxation models being imposed on us by advocates for the Organization for Economic Corporation and Development (OECD), the European Union, IMF and the FCO to obtain compliance with international tax standards in our Financial Services Industry and to achieve revenue sustainability, it was never the case where VAT was selected as a done deal for implementation in the Turks & Caicos Islands by our PNP administration.

For Neil Smith to suggest that the noble intentions by our government to search for sustainable revenue streams for our country as an endorsement of VAT is grossly misleading and is typical of how the Governor’s Office has been conducting the affairs of this country for the last three years.

It was in my budget address of 2007 when I first informed the people of the Turks & Caicos Islands about comprehensive revenue reform for our country. A direct quote from that address follows:

“While recent revenue growth has been positive, it is concentrated in a few areas. We need to lessen our dependence on import duties as global tariffs reduction become more commonplace. If we do not do likewise, our competitiveness in attracting foreign investment could be eroded. The current tax regime also needs to be widened if we are to raise the necessary revenue on a sustainable basis to implement our plans. We also need to have a tax regime, which incentivizes positive behaviours and penalizes negative ones. Mr. Speaker, these objectives can be achieved through the introduction of alternative broad based taxes that are elastic, and the introduction of user charges where they can serve to defray costs. The time to act is now – we plan to consider all options.

In this regard, Mr. Speaker, I led a delegation to the Bahamas last week to discuss their revenue regime and strategies, and develop technical cooperation and exchanges in this area. We have already held discussions with the Caribbean Area Regional Technical Assistance Centre (CARTAC) concerning technical assistance to prepare a Tax Policy Study for consideration by government. This study would look at our economic structures, tax regime and recommend reforms to increase revenue yield on a sustainable basis. We are committed to this worthy task. I look forward to keeping this Honourable House and the nation informed of activities in this area.”

I later made a follow up reference to broadening our revenue base in the 2008 budget but never did I offer support for VAT or any other comprehensive tax mechanism. Unfortunately the study referenced to in the 2007 address never materialized as the country was hit by two successive hurricanes in 2008 causing extensive damage throughout the country and the global financial collapse that immediately followed in 2009 made the exercise untenable.

Our administration back in 2007 was asked to consider four different models: income tax, property tax, sales tax and VAT.

Preliminary indications from the business sector at the time suggested that the real estate and hotel industries had no appetite at all for income tax or property tax. It was believed that the real estate market was just getting its legs firmly established and that any form of taxes on income or property would be a serious deterrent to investment and would derail the real estate sector. The sales tax and VAT likewise had vociferous opposition to them albeit less so than the others but never was there any decision nor was there any canvassing of support for one tax over the other by the former PNP administration.

To the best of my knowledge, the deliberate promotion of VAT was only done when the hand-picked members of the Advisory Council and Consultative Forum ill-advisedly passed legislation implementing VAT, Trials With-out Jury, and Hearsay Evidence legislation. My recollection at the time was that there was a public outcry against all three pieces of legislation. The radio talk shows vented the opposition of the people to these Bills and so did the print and televised media.

Ironically some of the very same people who were a part of these hand-picked bodies gave credibility to the same pieces of legislation that they are now vehemently against. Similarly, the very same Governor’s office who seeks to castigate and vilify the former PNP administration at every opportunity it gets now seeks to use this same administration to fortify its promotion of VAT.

There is a popular saying that I believe resonates universally which states “you cannot have your cake and eat it too”. I think this saying applies aptly to the Governor’s Office promotion of VAT as well as those who now oppose it and gave validity to its imminent implementation. I know some will be quick to say that they opposed those pieces of legislation when they sat on those bodies. To that I will use the other popular maxim which states “the devil is in the details”.

However, I believe that the entire country is relieved that the voices that seem to matter are speaking out in unison regardless of the channels that may have brought them to this central point. To that I say thank you to all and sundry as I do wish you success in this worthy undertaking to begin the New Year.

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