TCIG has today released a presentation charting the macroeconomic and fiscal history of the Turks and Caicos Islands since the 1990s. The presentation will be used to set the context for consultations on the European Union funded revenue study due to begin next week.
Brian Titley, the UK Chief Economic Adviser to the Governor, remarked that the presentations underlined the fragility of the TCI economy and its public finances. ‘These problems have built up over time and will not go away overnight. Corrective action is needed and now. Whatever administration is in government would face the same tough choices.’
The presentation reveals a history of poor administration and unsustainable economic growth through an over investment in the construction of real estate during the latter half of the last decade that outpaced demand.
‘The benefits of the rapid growth in construction activity were too narrowly distributed and short lived. At the same time there was a 3 fold increase in public sector spending to the exclusion of much needed investments in other business sectors, public infrastructure and in the education and training required to modernise public services and the economy. Together these decisions increased the vulnerability of the economy to external shocks’.
‘TCI is a small economy and in danger of getting smaller. If it is grow and compete effectively in an increasingly competitive regional and global economy it must correct its public finances, improve its public services, grow its consumer base and remove barriers to business innovation, creation, competition and growth. Not to do so will only damage the interests of Belongers and all residents in the long run’.
The tax consultations will play an important part in setting TCIG’s budget for 2011/12 which is being led by the Chief Financial Officer Caroline Gardner with Delton Jones, the Permanent Secretary of the Ministry of Finance.
They commented: ‘The announcement last week of the UK Government’s intention to provide a loan guarantee to the TCI represents a vital opportunity to turn around TCIGs finances, but revenue reform remains essential. TCIG has a growing structural deficit in its public finances; recurrent revenues have never covered recurrent government spending’.
Although revenues were buoyant during the middle of the last decade, due principally to the sale of crown land and increased imports of construction materials, public sector debt has exploded in the last 5 years. It will continue to grow rapidly unless wasteful public spending is cut and revenues improved. A narrow tax base, poor tax administration and the unchecked granting of tax exemptions and concessions by the previous administration have undermined the public revenue system in the TCI. It is no longer fit for a modernising economy. The need for reform has long been recognized within the Ministry of Finance but was overlooked by previous administrations.
‘There will always be some winners and losers from fiscal measures’ Ms Gardner continued, ‘but some existing taxes can be simplified and replaced by more efficient ones so the overall burden need not increase significantly. This, however, cannot take place overnight because new tax collection systems first need to be in place’.
Public consultations on the EU revenue study are due to start late next week. Work on the study began in October last year and follows up Professor Alan Roe’s review of the revenue system in early 2010. However, the study has already concluded that the introduction of a low annual tax on property is not administratively feasible or prudent in current economic conditions. The Government has accepted these conclusions.
The Ministry of Finance is also releasing the latest national accounts statistics for the TCI economy in a preliminary report. ‘Developing estimates of economic activity in our country is a demanding task and raises a number of difficult issues’, explained Delton Jones. ‘I am therefore grateful to my colleagues in the Department for Economics Planning and Statistics for their continuing hard work and analysis to address these issues and improve our statistics’.
Consultations on options for improving the revenue system in the TCI will be held at the Hilly Ewing Building on Providenciales from Thursday 17th to Saturday 19th February 2011 at the following times:
Thursday 17th February, 2:30 pm – 4:30 pm
Friday 18th February 10:00 am – 12:00 pm
Friday 18th February, 2:00 pm – 4:00 pm
Saturday 19th February, 10:00 am – 12:00 pm
All meetings will be live on Radio Turks & Caicos at the following times and can be hear via this website.
Copies of the slide presentation and national accounts report are available at www.gov.tc or by going directly to the following links.
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