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Today’s Top Headlines




Turks And Caicos Prepares GST Regime In Place Of VAT

by Phillip Morton, Investors Offshore.com

20 August 2013

The Turks and Caicos Islands, a British overseas territory, has announced plans to introduce a General Services Tax (GST) on a broad range of services from October 1, 2013, to buoy revenues after local authorities rejected the UK Government's calls for the adoption of a value-added tax (VAT).

It is proposed that the GST will be levied at a rate of six percent on the services of the accountancy, construction, real estate, IT, legal services, and tourism industries.

The potential yield from the tax will be considerably lower than under the ditched proposals put forward by the UK Government to adopt a broad-based value-added tax with an eleven percent headline rate, which would have replaced the Communications Tax, the Hotel and Restaurant Accommodation Tax, Vehicle Hire Stamp Duty, the Insurance Premium Tax and the Domestic Financial Service Tax from April 1, 2013.

Under GST, all businesses will be required to levy and remit GST regardless of turnover, and file monthly returns. Stringent penalties have been proposed to deter non-compliance.

Ahead of the introduction of the regime, the local Government has launched a series of public consultations in part to gauge private sector sentiment. Proposals to adopt value-added tax proved deeply unpopular, and were abandoned despite the completion of preparations towards the regime's implementation.

Proposals for a VAT were drafted after an interim Government was installed by the UK Government in the Turks and Caicos Islands on August 14, 2009, acting on corruption concerns. The UK Government 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.

Constant pressure from Turks and Caicos businesses and by the new Government led UK authorities to allow the Turks and Caicos Islands to elect how to consolidate its deficit, and on February 1, 2013, at a lengthy House of Assembly session, the local Government backed a bill proposed by the opposition to block the introduction of the 11 percent VAT.

TAGS: compliance | VAT rates | tax | business | value added tax (VAT) | legal services | goods and services tax (GST) | Turks and Caicos Islands | construction | penalties | services

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