Hugh McGarel-Groves, the Government’s Chief Financial Officer has made a point by point response to last week’s publication of the PDM Opposition Party’s position on Value Added Tax.
He refutes it will increase the cost of living in the Turks and Caicos Islands saying there is a wide range of VAT exempt and zero rated items – the costs of which should remain similar to pre-VAT. Customs duties have been reduced by 10-15% to accommodate the introduction of VAT: exempt items still have reduced duty applied; zero rated items allow business to claim the VAT back from Government. He points out that VAT in the TCI is designed to be a replacement tax mostly – taking over from hotel and restaurant accommodation tax, reductions in customs duties, vehicle hire stamp duty, domestic financial services tax, and telecommunications tax.
Hugh McGarel-Groves says water and electricity are zero rated – meaning that utility businesses can claim back VAT from the government on their costs. This could lead to reduced prices he says.
Education and religious supplies are exempt from VAT and there’s no Value Added on medical or dental bills – but these businesses can also claim their VAT back from Government. However, some sector such as lawyers, accountants and architects will need to start paying tax on their sales and deduct it from their costs.
He refuted the PDM charge that VAT would violate the equity principle in taxation saying income tax saw people paying more tax the more they earned; property taxes took proportionally more the more valuable of a property; corporation tax took proportionally more the larger the businesses profit. VAT was one of the most equal methods of taxation as qualifying businesses regardless of industry sector, and consumers would pay it.
He dismissed the PDM claim that VAT would impact negatively on businesses that did not meet the VAT threshold and stressed the costs to administering the tax were marginal – every well run business should know what its purchase and sales were. Each month the total amount of VAT paid out in purchases is subtracted from that received in sales.
On the charge that introducing VAT had been outside the scope of the Interim Administration Mr McGarel-Groves said the TCI was British Overseas Territory. As a result of the maladministration set out in the Auld report it had fallen off the edge of a fiscal cliff. The UK had stepped in to save it from going bankrupt. The British loan guarantee kept the country afloat and helped the TCI receive a significantly lower rate of interest on its loans, reducing the amount that the TCI will need to repay.
During the time of the Interim Administration it was run by the UK with extensive TCI input. It is now run by locally elected politicians within the framework of the law and the Constitution. The UK fully understands how fragile the recovery and the public finances were in the TCI. This was why, after much discussion and consultation, VAT was proposed to help improve the revenues coming to the public sector in order to maintain public spending.
Earlier RTC News spoke to Sharlene Cartwright-Robinson, leader of the PDM about the response of the Chief Financial Officer.
