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Turks And Caicos On The Mend After Fiscal Reform

by Amanda Banks,, London

23 March 2012

The Chief Financial Officer of the Turks and Caicos Islands interim government, Hugh McGarel-Groves, has reported significant progress towards correcting the territory's deficit after a raft of measures introduced last year, and the government has suggested that elections could resume as early as this year.

The interim government has reported that revenue increased to USD118.5m for the first nine months of 2011, an increase of 39% on the same period last year, and the deficit was reduced significantly, by USD33.5m, as a result.

"The finances of the Turks and Caicos Islands under the Interim Administration are definitely moving in the right direction," McGarel-Groves said. “This analysis shows that the measures we have introduced are having an effect.”

The territory's tax regime was subject to a major overhaul in 2011, following the British government's intervention on August 14, 2009, where it assumed control of the island's affairs, removed its elected premier, cabinet and assembly, and suspended much of its constitution. The action was taken after an enquiry reported that there was a "high probability of systemic corruption" being perpetrated, including, it is alleged, by the island's former Premier Michael Misick.

The 2011 austerity plan reformed various areas of the territory's tax regime, and introduced temporary taxes to compensate for the lack of a value-added tax, which is due to be introduced from 2013.

New taxes included the Insurance Premiums Sales Tax (IPST) and the Domestic Financial Services Sales Tax (FSST). The first levy, the IPST, is a 2.5% tax on insurance premiums charged on domestic policies in the Turks and Caicos Islands other than premiums on life and health insurance. The second levy, FSST, applies a 10% tax on service fees charged by domestic financial institutions including banks, trust companies, corporate management companies, money transfer companies, mutual funds, and credit associations.

Other measures included:

  • The introduction of a 6% Customs Processing Fee, levied on all imported goods and importers;
  • A series of changes to the system of work permit fees and significant fee increases of around 35%;
  • A new carbon tax on electricity generators;
  • A water sales tax on commercial customers and large residential customers;
  • A 10% bank tax on non interest-bearing services provided by banks; and
  • A 2.5% insurance tax on gross premiums for general insurance.

Commenting on a timeline for a new Turks and Caicos government to be reinstated, interim Governor Ric Todd has announced that, following significant progress both on tax policy and on establishing safeguards against corruption, elections could be held this year and local rule subsequently re-established.

TAGS: tax | sales tax | interest | fiscal policy | insurance | international financial centres (IFC) | budget | insurance tax | Turks and Caicos Islands | United Kingdom | fees | offshore | carbon tax

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