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The temporary government in place in the Turks and Caicos Islands has defended the decision to introduce value-added tax in the jurisdiction from next year.
The temporary government, installed by UK authorities to combat alleged corruption and unsustainable debt levels, said that the introduction of VAT in the Turks and Caicos Islands offers "the opportunity to further strengthen the country's fragile recovery", under a regime that is "simpler, equitable and a stable source of government revenue".
The government's statement questions the motives of those campaigning against the introduction of VAT, and suggests resistance is emanating from business sectors which have historically not paid tax.
“Given the difficulties endured by the TCI economy since the collapse of the last government, it is in the best interests of the entire community to ensure that government finances are secure and that it can continue to develop expenditure plans in line with local people's priorities - a process already begun in this year’s Budget," the statement reads.
“VAT is a proven system across the Caribbean. It is straightforward to administer and is beneficial here in that this single form of taxation replaces five different sets of ordinances that both government and business need to keep abreast of.”
For the Turks and Caicos Islands, VAT is not an additional tax, the government underscored, rather it will replace several existing levies that are complicated and burdensome for businesses and government to administer, namely: the Hotel & Restaurant Accommodation Tax; the Vehicle Hire Stamp Duty; the Domestic Financial Service Tax; the Telecommunications Tax; and the Insurance Premium Tax.
"VAT will also partly replace import duty and thereby start reducing the excessive, unnecessary and unfair benefits some businesses receive via import duty concessions," the government said. "VAT is a broad-based tax and will spread the burden across a larger portion of the economy, including the service sectors which currently pay no sales-related tax."
The introduction of the regime is proposed to be revenue-neutral, with increased revenues coming from the reduced cost of administration, and improved compliance.
From April 2013, the Turks and Caicos Islands will introduce a VAT of between 8.5% and 12%, which the government said will allow the territory to maintain a distinct competitive edge over its competitors in the mainly English-speaking Eastern Caribbean. To protect low-income taxpayers, a basket of essential food and household items will be exempt from VAT, along with healthcare and educational supplies, so that these remain tax free.A comprehensive report in our Intelligence Report series giving detailed information on offshore jurisdictions in tabular form, titled "The Lowtax Offshore Charts: Country Characteristics and Taxation; Residence Guide", is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report4.asp
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