fp Turks and Caicos

Opponents of value-added taxes and both political parties are continuing their fight despite the passage of the law creating the new form of tax, but the governor is saying no to stopping it from taking effect April 1.

“There will be VAT,” His Excellency the Gov. Ric Todd said at a press conference July 25. When asked if an elected government could repeal VAT, he said, “No.”

The Turks and Caicos Independent Business Council (TCIBC) says it hasn’t given up, even though the governor and chief financial officer have the power to prevent the repeal of VAT.

TCIBC Chairman Clive Stanbrook, a Queens Counsel attorney, said the group is looking into legal grounds to stop the tax, which he says was chosen without proper consultation. It may result in a procedural challenge that goes all the way to London and the Secretary of State, he said.

Meanwhile, the TCIBC says it will continue trying to educate the public and reveal the potential damage VAT could do to the economy.

To that end, the group held a public meeting July 24, and about 300 mostly expatriates showed up to find out more about the tax that is causing concern among both businesses and consumers.

Their presentation was much the same as the one they made before the Consultative Forum on July 12.

Several TCIBC members explained various aspects of VAT, but all reached one conclusion — VAT will increase the cost of living for almost everyone and hurt the marginally recovering economy. Consumers will spend less so government will collect less taxes, resulting in an increase in the proposed VAT rate of 11 percent that has occurred in most other Caribbean countries using the tax.

Nick Haywood, an accountant with PricewaterhouseCoopers Ltd., said he will benefit from VAT because he will be able to deduct taxes he has paid from taxes he will have to collect and pay government. He also will benefit because many businesses will have to hire him to implement the tax.

Haywood said he opposes the tax because it will cost more for government and businesses to collect the same amount of money government already is taking in. “I’m not sure we should change things to stay in the same place,” he said.

VAT also will replace the 11-percent accommodations tax, meaning that hotels and restaurants will benefit by being able to deduct their VAT expenses from the tax they charge tourists.

However, Turks and Caicos Hotel and Tourism Association Executive Associate Stacy Cox said her group, which employs more than 50 percent of the population, is against VAT because it believes costs will increase and tourists will spend less.

Ken Adams, owner of Building Materials Ltd. Do It Centers, estimated prices will increase up to 6 percent at his stores, which will increase the cost of construction. He accused the British of trying to make it more difficult for Turks and Caicos Islanders to build nice homes.

Dr. Sam Slattery explained that medical services will be exempt from paying VAT, but only for services. Doctors will have to pay VAT on all the supplies and services required to run their practices but cannot get any of it back because they won’t be charging VAT. That will mean increased prices for health care.

Edith Cox, finance manager of Graceway IGA who resigned from the governor’s Advisory Council in opposition to VAT, said it is not clear how much VAT will increase overall food prices. Government is still working out the details of exempt and zero-rated food items, but she gave a number of examples where prices would go up on basic food items.

All who spoke said the current system of relying on import duty for the majority of government revenue is simple, has worked well so far, and should not be abandoned.

“If it ain’t broke, don’t fix it,” Progressive National Party Leader Dr. Rufus Ewing told a cheering crowd.

Government says the only reason it has finally managed to predict a balanced budget with a small surplus in 2012-13 is because it slashed all government workers’ salaries by 10 percent two years ago, got rid of 400 government workers through voluntary severance and has had to forego spending on infrastructure like roads, water production plants and schools.

The current revenue system failed to keep government afloat during the recession, and VAT is predicted to be more stable during such tough times, government reasons.