Turks And Caicos Scraps GST Proposal

by Jason Gorringe, Tax-News.com, London

04 September 2013

The UK Government has confirmed that its overseas territory, the Turks and Caicos Islands has abandoned plans for the introduction of a General Services Tax, which had been drawn up in lieu of the implementation of a value-added tax. Having discarded both a VAT, and the narrower GST, local authorities now intend to boost the tax-take by expanding the existing tax base.

Plans for a General Services Tax were intended to introduce tax 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.

It was proposed that the GST would be levied at a rate of six percent on the services of the accountancy, construction, real estate, IT, legal services, and tourism industries, to broaden the consumption tax base.

The potential yield from the tax would have been 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.

The Turks and Caicos' Islands UK-Government appointed Governor Ric Todd has now confirmed that during the 18th meeting of the Turks and Caicos Islands’ Cabinet, in late August, the island's Premier, Rufus Ewing had decided to u-turn on the GST proposals due to negative feedback received from the Blue Ribbon Commission.

Instead the Commission's recommendation that existing levies should be hiked has been endorsed by Ewing, and will enter into force from October 1, 2013. The package will include increasing the Stamp Duty on vehicle hire to 12 percent; increasing the Communications Tax from 10 percent to 12 percent; introducing a 10 cents per minute levy on incoming international phone calls; and an increase to fuel duty by 10 cents from 75 cents to 85 cents per gallon.

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.