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The Turks and Caicos Islands may be forced to implement value-added tax (VAT) despite a vote in the territory's House of Assembly in favor of a bill to rescind the Value Added Tax Ordinance 2012, which provides for the implementation of the regime from April 1, 2013.
On February 1, 2013, at a lengthy House of Assembly session, the newly elected Government backed a bill proposed by the opposition to block the introduction of the 11% VAT from April. 16 members backed the measure, with just 2 in favor of proceeding with the implementation of VAT.
Since the announcement that VAT would be introduced, Turks and Caicos citizens and business groups have vehemently contended that VAT is inappropriate for the islands and is being "forced through" by the interim Government, at the behest of UK authorities.
The interim Government was installed on August 14, 2009, when the UK Government - acting on corruption concerns - assumed control of the territory's affairs - removing its elected premier, cabinet and assembly and suspending much of its constitution. Following three years of reforms, namely to improve the islands' finances and to introduce safeguards to ensure sound fiscal management and good governance going forward, the UK Government agreed that the islands could be returned to self-rule in elections held on November 9, 2012.
On making the announcement, the UK Foreign Secretary William Hague said that the final piece of the puzzle in closing this chapter in the TCI's history would be the implementation of VAT, to satisfy the UK Government that the territory would have a viable tax regime going forward.
Last month, the UK's Minister for the Overseas Territories, Mark Simmonds, rebuffed a request from the Turks and Caicos Islands' new Premier, Rufus Ewing, that the implementation of the islands' new value-added tax regime be deferred to allow time for the development of an alternative. He suggested that the islands review the regime in April 2014, a year after it is implemented.
Dissension between Turks and Caicos Islands officials and the UK Government has now hit boiling point, with the UK expected to veto any effort by recently elected officials to block the introduction of VAT.
In an immediate, direct response to the parliamentary vote, the territory's interim governor, Ric Todd, highlighted that the vote in favor of the Turks and Caicos Islands Value-Added Tax (Repeal) Act 2013 is meaningless without the backing of the UK Government, citing extracts from the territory's new constitution.
From April 1, 2013, the 11% VAT will replace Communications Tax, the Hotel & Restaurant Accommodation Tax, Vehicle Hire Stamp Duty, the Insurance Premium Tax and the Domestic Financial Service Tax. Import duties will be lowered by around 10-15%.
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