In an Associated Press story from the Montreal Gazette, the acting governor of the Turks and Caicos Islands [Patrick Boyle] has signed into law a value-added tax to shore up the finances of the troubled British territory.

An 11 per cent tax will be levied on a range of goods in the island chain southeast of the Bahamas starting next April. A government statement says the rate is the second lowest in the Caribbean region, after Haiti.

The law signed Thursday (19) contains a number of exemptions, including fruit, vegetables, fresh meat and hurricane supplies. The tax is intended to stabilize the finances in an island chain placed under direct rule by Britain in 2009 amid allegations that local officials had taken payoffs from developers. Elections making way for a return to local rule are scheduled for November.

For more on this story go to:: http://www.montrealgazette.com/news/troubled+Turks+Caicos+adopts+valueadded+shore+finances/6958679/story.html#ixzz21UAOlJvx

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

“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.

“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.

“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.

“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.

“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.

“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.

“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?

“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.”