Draft Turks And Caicos Islands Constitution Published

by Amanda Banks, Tax-News.com, London

17 March 2011

After a period of prolonged consultation, the UK Foreign and Commonwealth Office has published a draft constitution for the Turks and Caicos Islands, where the existing constitution had been suspended in 2009, following an investigation into allegations of systematic corruption.

As part of a constitutional and electoral reform process announced in 2009, a draft constitution containing "measures to embed good governance and sound public financial management firmly in the Turks and Caicos Islands" was released on March 8. This draft takes as its base the text of the suspended 2006 constitution, and reflects the recommendations of both the Commission of Inquiry appointed to investigate the situation, and those of the constitutional and electoral reform adviser Kate Sullivan, whose final report has also been published.

In August 2009, the ministerial government was suspended for an initial period of up to two years, with a Special Investigation and Prosecution team set up to investigate corruption allegations. In the financial crisis that unfolded, a support package with commercial lenders was brought in, and a short term loan was facilitated by the UK government to cover unavoidable public service commitments. In December 2010, UK ministers said the fiscal picture in the Islands represented an unacceptable collapse in the fiscal governance of the territory, and the UK's government had to provide support to prevent complete financial collapse. The Department for International Development provided a Chief Financial Officer to the Islands, tasked with addressing the structural deficit, and with putting in place a plan for achieving a sustainable fiscal surplus by 2012/13.

The constitution aims to meet public demand for better public governance by establishing a binding system of governance principles to improve accountability. It will provide for new budget and audit arrangements, and contain a new section to provide more medium and long term information on the finances of the government and the territory. It also aims to allow more public and political engagement in the process of government budgeting, and ensure that government borrowing remains within prudent and transparent parameters.

Sullivan's report, which the constitution heavily reflects, stresses that the constitutional entrenchment of a new financial framework is important for providing clarity, transparency, and the enforcement of compliance with the principles of financial probity. Under her recommendations, the government would be required to formulate a framework stating its principles of public financial management, to be subject to public consultation, agreed by the House of Assembly and Secretary of State, and published. This will set limits on debt levels relative to debt service costs, and borrowing will be subject to guidelines, and allowed only under an Ordinance approving the terms and conditions of any such loans.

In addition, the government would be required to make a six monthly report on the state of the public finances and economy, with taxation explicitly required to have prior approval from the Assembly, and all concessions from taxation to be published every six months. An Accounting Officer would be placed in each Ministry or Department, and be responsible for the regularity and propriety of its expenditure, receipts and resources. Finally, the Assembly must approve an Appropriations Bill before the start of each financial year, and the government would be required to set three year targets for revenue and expenditure.

The FCO's representatives will hold meetings in the Islands, to allow public discussion of the constitution, and will also meet with community groups and leaders. These meetings will in turn inform their final decisions on the Constitution. The period of consultation will continue until May 3, 2011.

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