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Turks And Caicos Bureaucracy Shuts Out Business

by Phillip Morton, Investors

28 August 2012

It appears that the Turks and Caicos Islands' government must quickly overhaul its lengthy and complicated procedures to obtain work permits and business licences in order to make investment in the islands a commercially-viable prospect for investors. The system presently in place, coupled with a stark increase in fees in the government's austerity plan has led to a substantial fall in compliance and renewals, a government official has revealed.

As outlined in the Turks and Caicos Islands' Development Strategy paper, for 2013-17, released this month, the complicated and protracted process for securing work permits and business licenses presents a major impediment to the success of the islands as an international financial centre, already suffering an identity crisis following the introduction of fiscal consolidation measures, a new constitution aimed at ridding the territory of corruption and fiscal mismanagement, and new international standards for increased tax transparency and accountability.

The highly burdensome work and business permit system has been made even less attractive by 35% hikes to fees in the island's fiscal austerity package, albeit taking into account that work permit fees had not risen for seven years. Highlighting the failings of the current system, the islands' permanent secretary of finance, Anya Williams recently revealed to TCI News Now that over 200 businesses had not renewed their licenses, and there had been a USD1.5m shortfall in fees received by the government during the first half of the year, which she attributed to a fall in compliance.

The Development Strategy paper criticises the "costly and lengthy procedures to enter and exit business including a complicated and protracted process of securing work permits and business license" exacerbated by "the shortage of domestic skills labour, monopoly pricing and a tradition of government investment concessions" that distort competition.

The report notes the case of one business which had lost USD150,000 to USD200,000 in revenue as a result of the lengthy bureaucracy in place in the territory, which has meant that the process of employing an overseas worker is typically a 5-month, highly costly affair.

Outlining the lengthy processes this business faced in obtaining the necessary approvals, the report said: “Staff with the required skills were not available in the TCI. They needed to be recruited overseas, this necessitated work permits. That in turn required a police record, recognized by the TCI authorities (and not all countries are so recognized), a blood test, and now a full medical, including a chest X ray. The medical also required proof of certification of the doctor confirming the medical. The doctor’s certification had to be submitted together with letterhead and address so it could be verified. All this information was then submitted to the Labour Department together with a staffing plan and a succession plan as the overseas workers were likely to be employed for more than 12 months."

"Of further concern to businesses is that the full fee for each prospective foreign employee is paid in full at the beginning of the process. An additional advance Repatriation Deposit of USD1,000 also has to be paid per employee. Depending on the skill required the total up front payment could amount to about USD2,000 per intended employee. In addition, blood tests have gone up in price from USD50 to USD120 per person. Certification of good health has risen in price from USD25 to USD250."

The experience of the business cited by the report involved the employment of 12 overseas workers. The report said the total cost of hiring 12 overseas workers amounted to over USD70,000. It identified that on this basis, very few business could afford to legitimately do business in the TCI.

The island's Ministry of Border Control and Labour's business plan for 2012/13 commits to improvements in this area, to streamline labour clearance and work permit procedures. One of the Ministry's six strategic aims includes to 'enable employers to lawfully employ suitably qualified staff, provided this is balanced against the legal obligation for 'Belongers' (residents) to be preferred to jobs'.

TAGS: compliance | tax | business | fiscal policy | law | financial services | employees | international financial centres (IFC) | Turks and Caicos Islands | fees | offshore | standards | services

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