Sources within the interim government have said that the reported approval of the Value Added Tax (VAT) Bill by the Advisory Council was a sham. The sources report that only one TCIslander Council member was present in the person of John Smith.
Joseph Connolly, who has registered his opposition to the tax, has recently resigned and the remaining Council members were reportedly absent when the VAT Bill was debated.
Edith Cox, sources say, will soon resign from the Council and Theo Durham, another member, left the council earlier but his departure has not been widely reported.
VAT has failed to gain acceptance as an appropriate tax for TCI. The tax requires careful formal record keeping by all businesses on which it is levied. The need for VAT or some other form of additional revenue measure has been evident, as budget forecasts have not been met by either the former elected government led by the Progressive National Party (PNP) or the interim government.
The fiscal year April 1, 2012, through March 31, 2013, budget predicts a balanced budget without VAT.
With first quarter reports being posted by the interim government there are concerns the budget is once again off track. The British-run government under Governor Ric Todd has said the imposition of VAT is mandatory and it must be passed into law this month for implementation April 1, 2013.
The biggest government budget problems appear centered on the National Health Insurance Plan (NHIP), which is costing the government a reported $60 million per year. The hospital buildings, which had years earlier been predicted to cost $60 million, now have a $125 million mortgage, which with interest is expected to cost TCI citizens one half a billion dollars over its 24-year life.
The NHIP plan can be cancelled at an additional and separate cost of $125 million, which is little more than two years’ of its current cost. Former Governor Gordon Wetherell approved the plan, while the PNP was still running the government under the 2006 constitution.
The other budget challenge is the $260 million consolidated loan arranged and guaranteed by Britain. The loan must be retired in 2016 and Britain has announced it will continue control TCI public finances for at least the next three years.
Responding to the latest communications from the anti-VAT coalition, acting governor and CEO Patrick Boyle issued the following statement:
"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.”