As has been widely reported  across all media outlets, blogs, radio and newspapers, the Minister for Africa, the Overseas Territories and International Energy, Mr Mark Simmonds has written to Premier Ewing stating that VAT will not be implemented on April 1st 2013 in Turks and Caicos.

A copy of the letter is here.VAT-Will-Not-be-Implemented-the-TCI

Whilst this is a victory for common sense and for the bipartisian , non political approach taken to this economic issue. VAT still remains “in the background” and the TCIBC remains wary that the FCO, DFID and others will change their minds..

 PRESS RELEASE from TCIBC  6th March 2013

Barack Obama recently said that “A good compromise is like a good sentence or a good piece of music. Everybody can recognise it. They say, ‘It works. It makes sense.’ ”

With the UK’s recent decision to set aside VAT in the TCI, it appears as though compromise and common sense have prevailed.  Stakeholders from every TCI sector can assume that they are finally being listened to.  But while this is a welcomed first step, all TCI citizens and residents must remain vigilant…as the Governor has stated, VAT is sitting on his shelf waiting to be implemented if and when it is deemed necessary.

This must be the next step in the VAT struggle…to see the end of the poorly drafted VAT Ordinance that was rushed into law prior to last November’s elections.  This poorly written Ordinance should not be left to sit on the Governor’s shelf, hanging over our heads.  VAT remains a square-pegged British solution for our round-holed economy.

And while we welcome the compromise expressed in Minister Simmonds’ recent letter, a few irregularities in that letter should be noted:

·         It seems as though the FCO and DFID would welcome the idea of TCIG working to solve a problem within the framework of the Constitution.  Instead of criticising the Private Members’ Bill, it seems as though Mr. Simmonds would welcome the well-informed Parliamentary debate and vote that took place in the House of Assembly on Feb 1^st.

·         For the first time in the history of the TCI, it seems as if a Governor will not be assenting to a Bill passed in the House.  The Repeal Bill still sits on his desk, and per our Constitutional right we must now ask on what grounds was the Governor’s assent withheld?  Has the matter been referred to the Secretary of State which would be the next step?

·         As we know, the VAT Commencement Order was never signed.  This was pointed out by anti-VAT groups on numerous occasions when the Implementation team published deadlines on registration (as of the end of January, only 5 companies had registered).  Technically, it appears that the VAT Commencement Order (for the registration provisions) should have preceded any VAT registration.

In response to Mr. Simmonds’ recent letter, Premier Ewing has rightly stated that “there will always be the real threat that VAT can be implemented by the stroke of a pen, without the need for further debate.  I am firm in my conviction that on the question of VAT the only fair solution is for the Ordinance to be repealed, thus removing once and for all the possibility of taxation without representation”

And as Opposition Leader Sharlene Cartwright-Robinson stated, “we celebrate this historic unity of Government, Opposition and business community.  The firm stance of the business community and the House of Assembly (together with the failure of businesses to register) made this feat possible”

The recent committee’s conclusions are that ” The Committee believes that the approach for implementation of VAT for April 1st is unrealistic and increases the probability of its failure…which will result in Government’s loss of revenue..”

FINAL REPORT FROM THE APPROPRIATIONS COMMITTEE ON VAT

With an astounding lack of information available to support the decision on using VAT as”the best” tax collection tool for TCI, the TCIBC commissioned an independent report on Tax alternatives for these islands. The purpose of the report was to try to help local business and member of the island’s population understand these tax issues.

The Teather report Feb 2013

Dear Foreign Secretary,

Please find attached joint letter from the Turks & Caicos Independent Business Council and Providenciales Chamber of Commerce regarding repeal of the VAT Ordinance in the Turks and Caicos Islands.

Sincerely,

Executive Committee

TCIBC

VAT Repeal ltr to FCO 05FEB2013

You can see here the updated and extended version of the video that shows the comparison between St Kitts and the TCI.

VAT in St Kitts a retrospective view and its implications for the Turks and Caicos Islands.

Rt Hon William Hague

First Secretary of State and Secretary of State for Foreign & Commonwealth Affairs

We write to you on behalf of the Turks and Caicos Independent Business Council (TCIBC), an organization that represents the interests of virtually the entire spectrum of our business community. We have the declared support of all the political parties, who are united in their emphatic opposition to the way VAT has been handled by the Interim Administration.

As a business group we applaud TCIG’s many achievements over the last few months in moving TCI towards a balanced and fiscally responsible budget with a growing surplus. As Anya Williams PS Ministry of Finance stated on July 27th 2012.

“We regarded this year’s budget as something of a breakthrough as it was the first in a long time that indicated that a return to surplus was possible by the end of this year. The figures from the first quarter indicate that we are making good progress to achieve this.

“We are satisfied that by and large this Government’s budget is achieving what it set out to do. We must continue this stable, sensible progress.

“QUARTERLY BUDGET STATEMENT SHOWS SURPLUS”
Turks and Caicos Islands Government’s (TCIG) first quarterly financial statement of 2012/13 published Fri, 27 Jul 2012

We hope that the senior members of TCIG will listen to Anya’s counsel –

“We must continue this stable, sensible progress.”

The current misconceived plans to introduce VAT into a small, single income (tourism) economy is a disaster in the making; one that could come back to haunt the FCO and DFID in years to come.

Despite documented, widespread opposition from soon-to-be elected political leaders, all sectors of the business community and thousands of citizens, TCIG still refuses to provide any real, hard evidence or analysis showing how VAT will work in the TCI.

Throughout this whole VAT episode TCIG has –

• Shown a complete lack of respect to the people of TCI with no major effective consultations. The public meetings that were held were not consultations and did not meet their goals of helping to educate the population at large.
• Pushed through the legislation at such a pace that it resulted in the resignation of three members from the Advisory Council.
• Failed to provide any data or financial modeling to support any of its statements that VAT will be beneficial to TCIG cash flow and revenues.
• Failed to provide a single piece of data assessing the social impact of introducing VAT.
• Failed to provide basic economic data with regards to the current state of the territory, including its physical infrastructure inventory and human resource inventory.
• Failed to provide projected cash flows and revenues using the current system as compared to VAT.
• Failed to provide any form of risk analysis or cost benefit analysis related to the introduction of VAT.
• Failed to provide a detailed budget for the implementation of VAT both in regards to start up and implementation costs and the recurrent costs in a mature system.
• Failed to provide a detailed analysis of the human resources required for both implementing VAT and managing the process moving forward.
• Refused to provide the EU study that the CFO insists suggests that VAT is the way forward to ensure adequate government revenue.
• Refusal of the CFO to provide any data at all.

We find it reckless that the FCO and DFID are permitting such a wholesale change to the revenue system in Turks and Caicos without the proper analysis and explanation that any commercial bank would demand from even the smallest of enterprises.

We fully agree that VAT can work in a country that already has the necessary requirements for its administration and a broad-based economy that would benefit from lower import duties. However, the TCI is not that country. Many emails, reports and messages have been sent to TCIG warning them of the unique problems faced with doing business in Turks and Caicos –with no response or acknowledgment. TCIG chooses to disregard our advice and provides no evidence that VAT is the right choice for our islands,

Barbados is a very good example of a small country that assumed VAT would be a solution to many ills when it has in fact exacerbated their financial mismanagement. Many commentators on VAT and development, including the IMF, now seem to agree that the economic value of VAT as opposed to a tariff based taxation structure is negligible in a country where little value is being added in the economy. In this situation, as with ours in the TCI, the difference is that VAT is expensive to implement, expensive to collect and burdensome on businesses -especially smaller ones.

TCIG has clearly shown time and again that it cares little for the thoughts or concerns of the local population or political parties when it comes to the matter of VAT. Nothing TCIG officers have done during the VAT process can remotely be described as good governance.

Significant changes in taxation policy are the remit of elected representatives who must then “live by” those decisions and who are answerable to voters and members of their community. These are the sort of decisions that should be made by an elected Government.

TCIG has already deferred significant amendments of the Planning Regulations to the soon to be elected Government. Surely a matter so central to the future well being of the country is also a matter that should be deferred. Now that the British Government has agreed to return power to a local government in just 6 weeks time, it is only appropriate that they should be trusted to decide how the TCI is to raise it’s own revenues.

VAT is the responsibility of those who govern and answer to the people.

There should be no change in taxation without representation.
VAT in TCI must be a matter for an “elected” Turks & Caicos government.

Yours Sincerely,

Mr Clive Stanbrook QC
Chairman TCIBC,

Photo from Flickr

In its continued effort to introduce a Value Added Tax (VAT) into Turks and Caicos, the Turks and Caicos Interim Government (TCIG) is claiming that “significant reductions (in import duty), many in excess of the 11% rate of VAT, provide the evidence that prices need not rise after VAT.”

However, careful and considered analysis of the figures provided in the VAT Ordinance and subsequent statements clearly indicates that price increases of 4-6% are likely in Turks and Caicos as a result of the introduction of VAT.

We urge member of the business community, political leaders, and citizens to study the figures and make up their own minds. A full response to the TCIG claims and accompanying spreadsheets are available for download below.

We also made a short movie which goes over the spreadsheets and figures  -scroll to the bottom of the page to view the video.

Government Statement 24^th September 2012:

“The Government is pleased to announce the levels of reduction in import duties is in line with previous indications, generally at least 10% across the board, with larger reductions, at 15%, on several key items such as vehicles, beer and some ‘green’ items….Clearly, these significant reductions, many in excess of the 11% rate of VAT, provide the evidence that prices need not rise after VAT is implemented from 01 April 2013. Given the new import duty rates provided by the Collector of Customs, it’s clearly scaremongering to continue to suggest so.” 

Response:

The vast majority of items which will be impacted by the reduction in the duty rates fall into the 10% duty reduction category, with only a few select items benefitting from the 15% duty rate reduction.

The majority of products sold by a typical retailer fall into the 0% – 40% duty range and will only benefit from the 10% duty reduction where applicable. Examples of products falling into the various duty categories are shown below:

0% Duty Rate – Produce, fresh meat, flour, rice, grits, oats, maize, barley, frozen chicken leg quarters milk, eggs, corned beef, infant formula, cement, books, non-prescription medication

10% Duty Rate – Butter, cheese, processed meats, lumber, plywood, paint, building bricks & blocks, computers, printers, electronic storage devices, pet food

15% Duty Rate – Most grocery items: tinned peas, fruit juices, bread & bakery products, pasta, soup, breakfast cereals, ketchup etc

30% Duty Rate – Washing detergent, toilet paper, household cleaning products, tin foil, soft drink beverages (eg sodas, Gatorade etc), stationary, garden supplies, power tools, toys & games, electronic equipment, auto parts

40% Duty Rate – Chocolate, candies, cough syrup, fireworks, garbage bags (non-biodegradable)

The point overlooked within the Government’s statement is that the 10% reduction being made to the duty rate is applied against the first cost of the item, however, the 11% increase due to VAT is being applied to the sales price. Given that a retailer’s sales price may easily be twice that of the first cost of the product (after duty, CPF, freight and mark-up), the 11% VAT charge is being applied against a much higher figure. Hence, the VAT charged is significantly higher than the corresponding duty reduction.

As a very simple example, if the first cost of an item is $100 and it is currently sold for $200 by the retailer, the 10% duty reduction would result in a duty saving of $10 and reduce the retailer’s sales price to $190 (passing on this duty saving). VAT of 11% is charged on the sales price of $190, resulting in VAT of $20.90. Hence, the revised sales price is $210.90. This represents a price increase of 5.5%.

Government Statement 24^th September 2012:

 ‘In addition to falling levels of duty, VAT registered businesses will benefit as they offset the VAT that they pay out against that which they collect’.

Response:

For a VAT registered business the cost of VAT when purchasing an item (input VAT) is not included when calculating the landed cost of a product as this input VAT is reclaimed. Only the VAT charged at the point of sale (output VAT) is included in price of the product on the shelf.

For a company that imports and sells products, the Government receives the full amount of VAT charged on any item sold in two stages. Firstly, the Government collects the input VAT paid at the point of import and, secondly, the Government collects the VAT charged at the point of sale (output VAT), less the amount of input VAT already paid. As such, the company remits the full amount of VAT collected from the customer at the point of sale, but the payment is split into two stages.

Consider a situation where $75 of input VAT is paid to the Government against an item at the point of import. When the item is subsequently sold, $100 output VAT is charged the customer. At the point of sale, the amount of VAT remitted to the Government in relation to the sale of the item is only a further $25 as the company has already paid $75 VAT at the point of import. Hence, the total amount remitted to the Government in respect of this transaction is $100, ie the full amount of VAT charged to the customer.

As such, in terms of VAT directly associated with selling a product, there is no real VAT offset, 100% of the VAT paid by the customer is remitted to the Government by the retailer (but in stages).

The potential impact on the operating costs of a business resulting from the ability to offset VAT paid against these indirect costs will depend on the nature of the business. This is further discussed below.

Retailers who are VAT registered and sell only taxable items will be able to claim back all the input VAT on their operating costs. In this case, certain operating costs may decrease providing the suppliers of these businesses pass on the duty reductions in their net sales price before adding VAT. Also, the cost of directly imported supplies will decrease as the VAT registered business can claim back the input VAT and benefit from the duty reduction. However, other operating costs may increase relating to purchases from suppliers who are not registered for VAT, who increase their prices to cover their increased costs following the implementation of VAT. Also, any operating costs directly related to third party labour costs are likely to remain unchanged as there is no associated duty saving. As such, only a certain element of the operating cost base of this type of business will decrease.

Retailers who provide only exempt supplies will not be able to reclaim any input VAT. For example, this will impact businesses providing medical and education services. For these type of businesses, operating costs will increase as no VAT can be reclaimed relating to the sale of an exempt supply.

There will also be VAT registered retailers who sell a mix of exempt and taxable items. These companies will only be able to claim back a portion of their input VAT based on the ratio of their exempt to taxable sales. For example, if 30% of a retailer’s sales relate to exempt items (eg produce, fresh meat, cement etc), the retailer is only able to claim back 70% of the input VAT paid in relation to operating costs.

For a company providing a mix of exempt and taxable items, there will be certain operating costs which will increase and others which will decrease. For example, security costs will increase as 11% VAT will be applied against a security company’s invoice each month. Given that a security company’s billable rates are based on their staff wage rates, not the importation of goods, VAT will be an incremental cost on their invoice with no corresponding reduction in the underlying billable rate.

Hence, companies supplying, for example, 30% exempt items would only be able to claim back 70% of the incremental 11% VAT, resulting in a 3.3% increase in their security cost. Likewise, any other third party expenses which relate directly to an individual’s time being billed (eg maintenance technicians, mechanic labour, attorney fees, advertising, IT technician, consultant fees etc) will result in an additional expense as only a portion of the incremental VAT cost can be reclaimed.

However, there will be operating cost savings resulting from the purchase of materials which are not sold onwards, as the company would benefit from the 10% duty reduction and would be able to claim back a portion of the 11% VAT charged (eg office supplies, cleaning supplies for the business etc). There would also be a benefit in areas where VAT replaces an existing tax which is already being paid by the business but presently can’t be claimed back, (eg Telecommunication Tax & Financial Services Sales Tax). There will also be savings on capital expenditure.

Hence, for businesses supplying a mix of exempt and taxable supplies, the impact of the introduction of VAT on operating costs will vary from business to business depending on the nature of their input costs and the mix of exempt and taxable services they supply. It is not certain that there would be an overall decrease in operating costs for this type of business and there may actually be an increase in operating costs.

Also, not to be overlooked, is the fact that VAT is chargeable on commercial rents. Hence, any landlord which exceeds the VAT threshold will have to register for VAT and charge VAT on the rental charge to any business renting their premises. This does not impact a tenant who is registered for VAT and provides only taxable supplies as they can claim back 100% of input VAT.

However, for a business too small to register for VAT or a business supplying exempt goods/services such as a school, doctor, dentist etc, they are unable to claim back any input VAT. Hence, if a business rents from a landlord who is required to charge VAT, their rental charge will increase by 11%, unless the landlord makes the decision to absorb the 11% VAT charge. Hence, either the landlord or the tenant is effectively taxed an incremental 11%. This may have a significant impact on businesses in the larger commercial plazas, or impact commercial building property prices if landlords reduce their rental yields by absorbing the 11% VAT themselves.

Download Excel Spreadsheet

VAT Impact CIF Model 27 sept

A quick movie that we hope helps you understand the figures on the spreadsheets.

If you need to hit the “fullscreen mode” to make it easier to view the figures. OR you can download the spreadsheets and follow along too !

VAT in TCI Some Figures from Brilliant by Tropical Imaging on Vimeo.

From Flickr

A large turnout at the Gus Lightbourne complex last night clearly shows that the concerns over VAT are still real and in the forefront of many peoples minds.

For those that could not make the meeting

Here is a link to the slides - slideshare.

Here is the video from St Kitts and Nevis.

This short video piece was shown at the meeting as St Kitts/Nevis recently introduced VAT  some 22 months ago and has very current experience of its effects on the local economy.

If playing the video is difficult, it might be because this is an HD video so let the “play” bar along the bottom of the video fill up to the right before you hit play. You can also download the video too !

TCIBC – VAT in St Kitts/Nevis. from Brilliant by Tropical Imaging on Vimeo.

Photo via flickr

Open Letter to Mr Boyle, Acting Governor fully supported by the TCIBC.

Dear Mr Boyle,

Please find below a response to Mr Smith’s release of yesterday. This letter although signed by me has been reviewed by many individuals and thus represents questions from those not comfortable to ask directly. In the spirit of transparency I have been asked to send this to both the current TCI blogs for wider input and participation. I have no say in whether they choose to publish them. Please accept this letter in the spirit in which it sent, that is as part of an ongoing democratic dialogue and consultation.

Text in italics is from the original Turks and Caicos Interim Government Press Release .

Responding to the latest communications from the anti-VAT coalition, Patrick Boyle, Acting Governor of the Turks and Caicos Islands said:

I suggest that the current situation is not just some anti-VAT coalition, the views expressed come from the people and residents of this country. They are being articulated through several different groups and media.  A significant majority of businesses have signed the letter put out by the TIBC (over 280 on the TCIBC website). A significant proportion of the English speaking adult population has signed a petition (I am told over 3000, 80% are Belongers), and the leaders of the two political parties have stated for the record that their official position representing the party membership is No to VAT (at this time). By my calculation that is the majority of the country. A country wide coalition perhaps?

“There seems to be a notion amongst the anti-VAT campaigners that the TCI is, financially speaking, somehow out of the woods. When I read this I am genuinely alarmed. It reluctantly forces me to question others’ comprehension of the issues that this country faces when I hear statements such as ‘…the (TCI) deficit is a thing of the past…’, ‘…(TCI) finances are no longer in a mess…’ or that the Interim Administration is somehow not contributing to the good governance or the sustainable development of the Turks and Caicos Islands. TCI is far from perfect today, but by any measure it has turned a corner over these past three years.

It is clear that the country has turned a corner and the Interim Administration has indeed played a very important role in this process. Importantly great sacrifices have been made by many segments of the population. We are all well aware that we are not “out of the woods” which is exactly why we don’t want to rock the boat as the current program is slowly but surely empting the boat of water. Introducing VAT might well rock it and sink it. To continue the nautical analogy, steady as she goes seems a safer bet.

“VAT is good for this country because it helps provide the Government with a more regular and reliable income through monthly payments and by broadening the tax base to include all businesses with turnover above $200,000, some of whom currently pay no tax whatsoever on their sales.

The TCIG needs to explain this vacuous statement in detail. Most importantly why does VAT ensure a steadier monthly income over the current system? We need to see the models to accept this statement. Otherwise it is simply another statement of “fact”, just as one might state that the sky is red. Stating it does not make it so.

Show us a model that proves that broadening the tax base will bring growth to this specific economy. The people of this country have been asking for this data for months and yet none is forthcoming. Why is that? Is it because there is no basis in fact that is accepted by economists in the context of the TCI, or indeed any micro economy such as ours? If the models exist why not simply publish them?

As for some sections not paying tax, do you not mean some sections are not collecting tax? As VAT is a consumer tax paid primarily by the final consumer, businesses only collect the tax charged on their services to their customers, on behalf the government. This idea has led to a misunderstanding that businesses are not paying tax. It seems that many simply don’t understand that VAT is not a business tax, it does not tax business activity. VAT is a tax on consumption of services. What TCIG is concerned about is that you feel that segments of our overall economic activity don’t raise sufficient tax revenue? No? What we would ask is which specific activities are you targeting and will taxing them cause an increase in cost to the end user that will make those services non competitive when compared to our regional competitors. Equally important will this type of broadening of the tax base push up overall costs which in turn affect the less well off in this community by pushing up day to day prices.

“Those who criticise the proposed introduction of VAT seem to have forgotten that under the Misick regime when this country was swimming in money that there was still millions of dollars worth of unpaid bills, that all Government bank accounts were in overdraft and although some capital works was carried out it was simply not paid for. This was only three years ago. In every sense we are still paying for those actions.

Firstly your comment that the country was swimming in money speaks so clearly to the fact that none of the current administrators were here at the time. I don’t recall many swimming in money. Yes indeed we are now paying off the debt on the capital investment in our country, as is every other country in the world. Look what we got for it. Some would argue a great deal; paved roads, schools, two hospitals, a couple of world class sports facilities, a modern state of the art runway, massive international investment and economic advancement for many, scholarships leading to a significant number of citizens acquiring not only Bachelors and Masters degrees but experiencing other cultures. I could go on. All this for $200 million does not seem so bad.

Debt and public borrowing is a fact of modern government life, just as it is for business. Managing that debt and its repayment as part of the larger economic picture is the role of CEOs, CFOs and company Directors, be they in the public or private sectors the world over. The fact that previous administrations got it horribly wrong speaks as much to inexperience as it does to anything else. Sadly our oversight processes from HMG were arguably weak and failed to catch the enormity of the unfolding accounting and financial mess. It is in hindsight a shame that there was not more assistance in guiding the management of the growth of the country’s finances with its related increase in complexity and need for much tighter financial control.

We await the GDP figure which the TCIG seems so tardy in publishing so that we can gauge where we actually are. If then we find that our debt is in the region of 35-40% as many of us guess it might be, then we are actually doing quite well. If indeed our GDP proves to be over $800,000 then our public debt represents 26% of GDP. By comparison; Spain 36.2%, UK 47.5%, USA 60.8% France 63.9% Germany 64.9% Italy 104% and Japan a whopping 170%. Even a small surplus is a surplus and again few countries are in such a “healthy” position. All of these facts support the argument that the current system is doing OK, just as it has done for the last 20 years. It surely needs tweaking but many feel it does not need a fundamental change at this particular moment in time.

“Today this country has a debt that stands at $214m. We need to pare this down by 2016 in order to refinance this loan from a commercial lender or lenders on more beneficial terms without the need for the UK Government’s guarantee. We are well on the way to achieving this and VAT will ensure more stable and reliable revenue flows as this process continues over the next few years.

Again many of us ask quite simply show us specific numbers and the models to support this statement. I would humbly suggest that this is what Mr Bellingham was referring to when he spoke about transparent government, it means transparent, open and honest engagement of the community with real hard facts.

As a non-elected interim government made up in part by visitors to our country, your duty to inform and consult seems particularly important. Hence I suspect Honorable Bellingham’s recent comments  reminding this administration of its duty to the people.

“VAT will also assist in generating the sustainable funding required to address the many infrastructure deterioration issues in our schools, roads and other essential public assets, where vital improvements are required.

Again many ask can you supply the data and financial models to support this statement. Many of us are trained in business, accounting and economics, along with public health and other helpful skill sets that allow us to make reasoned judgments when presented information.

“It is to everyone’s credit that the TCI finances are much improved and that we are forecasting a small surplus this financial year. But this is extremely fragile. Yes, we are in the black, just, and for this year.

This statement is addressed above. We understand the fragility, which is exactly what concerns us about the current approach to introducing VAT.

“Yes, we have been able to prioritise some spending on roads, water making plant and schools – and have the money to pay for it. But surely people realise that this has been achieved only by introducing draconian spending restrictions, which are set to continue until we can be sure the government’s financial position will remain in surplus and until economic growth allows increases in government expenditure? Look around. Decades old reverse-osmosis plants? Crumbling roads? Overcrowded schools? While our new investment is welcome, it is clearly the tip of the iceberg in terms of what will be needed in the years ahead. What of the pay cuts taken by civil servants? When and how will their pay rise to what it was before, never mind enjoy real increases?

Can I remind you that we the people built this country.  Everyone is quite aware of the situation. The residents live it every day as ordinary citizens. Every family has been directly touched by the decline in the construction industry, most if not the majority of families have been touched by the rationalisation of the civil services and the cuts in pay. Many individuals have left as businesses failed, both Belongers and expatriates losing much if not all of their savings. Many struggle to pay utility bills, feed their families and educate their children.  It is for exactly this reason that so many are rightly concerned about the “VAT experiment”. It is why so many feel that now we have some degree of financial stability, the country needs to proceed very cautiously so as not to damage the fragile recovery.

“TCI finances have also suffered from a huge unpredictability in recent years: $130m in financial year 09/10; $170m in 10/11; $200m this year. What do we do if Government income is only $190m in the next financial year, for example? Although this is not forecast, prudence requires us not to entirely rule this out. VAT has a significant role to play in helping us achieve a more secure and sustainable future.”

Looks like steady growth to us and a review of the Roe Report contains graphic illustration of this. That said please would someone in the administration show us one single economic model pertaining to the TCI that supports these statements. Please show us clearly how VAT will be “the magic bullet” that you claim it to be. We have a genuine fear, supported by knowledge and data which has been presented to the TCIG that VAT might actually misfire badly and represent a nail in the coffin just as we are beginning to move away from the difficulties of the past few years. Difficulties shared by the entire world. Compared to Spain, Greece and many regional small island economies we are actually looking “pretty good”.

Many would argue, don’t rock the boat with an experiment in taxation based on no locally specific hard data or models. If TCIG cannot tell us what the GDP is and the details of the economy, how do they make complex financial plans?

You might argue that VAT is being introduced on the basis of expert consultants who have studied this economy. However on reflection just how many individuals are we talking about?

Much is made of the PNP’s consideration of VAT. In reality it was the one tax chosen for further study out of a basket of three alternatives. It was part of a larger ten year strategic planning exercise. The PNP have publically stated the same.

Then we have Professor Roe’s report which was a revue of the TCI tax system and made several observations and recommendations. Many don’t see these as strong thumbs up for VAT. Also most individuals who met Professor Roe will state that VAT was not a specific topic of discussion in meetings perhaps dispelling the comment that the community was widely consulted with regards VAT by Professor Roe.

A study was also conducted by EU funded revenue consultants in the same year. This may or may not have resulted in a report that we are told is “confidential” and not for publication. Thus we have no transparency in this exercise.

Another team (the same one) of EU consultants including Jorge Baca Campodonica, who was discovered to have been charged with and convicted in Peru’s Supreme Court for misappropriating funds and high level corruption related to tax fraud? This report has to be tainted as he was we are led to understand a key member.

All would be happy to see the exact list of reports and consultants that forms the basis for the administration to introduce VAT at this time. Hopefully it is significantly larger than the above mentioned names

For clarity I ask the question again; exactly how many individuals have been involved in modeling the most efficient and effective government revenue generating policies and tax administration in the setting off the overall economic make up of the TCI?

Finally when will the administration recognize that the entire population is not being difficult just to be difficult? They want hard data, proper models and real engagement to discuss our future wellbeing.

The consequences of this decision will remain with us long after the current interim administration has left our shores. We simply want to be shown the data supporting the introduction of this new system.

We want and need to be comfortable that  it is indeed an appropriate tool to use for the raising of government revenue, that it will not do harm to the overall economy, threaten its stability and future growth, and perhaps most importantly that it will not impact the less fortunate and financially challenged segments of this population.

All this seems entirely in keeping with the democratic process and the conditions of good governance.

Most respectfully,

Dr Sam Slattery, on behalf of the many individuals who have asked me to write to you.

Photo via flickr