My fellow Turks and Caicos Islanders and Residents of these “Beautiful by Nature” islands, it is indeed with much optimism that I address you today. An optimism that has never faded even through the many challenges and barriers to progress that were placed in our path since being elected to Government. My Government held as its primary mandate, the stabilization of Government finances and the facilitation of economic growth that would create jobs and small businesses that would evolve into the primary drivers of our economy. The Government’s tax rationalization strategy was one of the major pillars upon which we placed the economic recovery of our county.
Since assuming office, we were forced to implement a number of small taxation measures to close the fiscal gap that existed due to the non-implementation of VAT. These measures were essential in the absence of a replacement broad base taxation measure and revenue collected by these means ensured a growth in Government revenue that was predictable and less vulnerable to global economic shocks. All of these taxation measures were implemented or proposed to ensure that the Government was able to deliver on its responsibility in providing for the people, the many critical services that are required. As a Government, we no longer have the opportunity to implement a broad base tax that would have had the least impact on the unemployed. With the failure to pass the payroll tax, we must also recognize the task of providing for the people, through the creation of jobs, the delivery of capital projects and the provision of critical services will be even more challenging, but this is a challenge that we are committed to overcome.
The Payroll tax was intended to be the broad base taxation measure component of the Tax Rationalization Strategy that was presented to the people of this county over the past several months and the House of Assembly in the past week. The Payroll Tax Bill, from all indications during the debate in the House of Assembly, did not receive the majority support in the House of Assembly and it was left at the stage of its second reading. It is my Government’s intention, during the next sitting of the House of Assembly, to formally withdraw the Payroll Tax Bill 2014 from the House of Assembly.
Even though such actions and decisions would have some negative impact on Government finances and our ability to deliver on some key and important responsibilities, we remain optimistic about the direction of our economy and confident in our ability to meet all of our obligations, including the servicing of our current and future loans. This is due to the hard work and efforts of your Government over the past year and half in facilitating economic growth with progressive increase in Government’s revenue every quarter. Most of this increase is due to performance in the tourism and related sectors of Foreign Direct Investment (FDI) and real estate.
Our Government will continue to attract FDI and create the environment for the development and growth of small and medium enterprises (SME) and place an acute focus on manufacturing and processing and financial services sectors, through which we can further diversify our economy. To this end, we will deliver on our promise to give back and rationalize taxes as we work towards our mandate of lowering the cost of living and creating jobs. We will reduce the recently-approved increase in business license in some areas by fifty percent, putting focus particularly on SME and tourism related businesses. We will also reduce the Freight and Insurance Tax (FIT) from 15% to 7.5%. I hasten to add that it was our hope to eliminate both of these taxation measures entirely with the implementation of the payroll tax, but we are now unable to do so until we are confident that the revenue gap is bridged in a sustainable manner.
We will within the next 2 months, implement an NHIP Amnesty Programme that will waive penalty arrears, with persons still being required to pay the principal amount, following consultation with NHIP. It is also intended that going forward, NHIP penalties will be reduced from the current 10% to 3%, non-compounding.
The 2014/15 budget has been finalized, taking into consideration the loss of revenue projected for payroll tax and reduction in revenue from freight and insurance tax and revenue loss from reduction in business licenses. These revenue losses will be offset by the withholding of funds from the Sinking Fund and the transfer of funds from the Airport’s Authority. There was no impact to funding for currently budgeted capital projects for fiscal year 2014/15, save for those additional projects that we would have been able to implement had the payroll tax been passed and were we able to withhold even more funding from the sinking fund.
Therefore my Turks and Caicos Islanders, we have now emerged from a period of mere fiscal stabilization and into a period of economic growth. Our credit worthiness will rest heavily on our ability to drive economic growth that is sustainable with high levels of fiscal responsibility. The Standards and Poor’s Credit Rating Agency will be releasing our credit rating assessment later this evening. This will be the first credit rating for The Turks and Caicos Islands, and whatever it may be, it will stand as the starting point for us to improve upon as we become a more economically progressive, fiscally responsible nation with a high level of integrity and one that retains the respect and confidence of the international community. This is our goal and our plan as we continue to work for you, now even more committed and more dedicated to the cause of our future.
May God continue to bless you and these “Beautiful by Nature” Turks and Caicos Islands.
