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Commentary: Minister regrets 'No VAT' in Turks and Caicos Islands
Published on January 18, 2016 Email To Friend    Print Version

By Anthony L Hall

Rumors of the sun setting on the British Empire have been slightly exaggerated. The dominion Britain still exercises over the Turks and Caicos Islands (TCI), my mother country, attests to this fact.

As it happened, I was in the vanguard of TCIslanders who called on the British government in 2008 to assert its dominion by suspending the TCI Constitution:
 

Alas, outrage is not sufficient to hold TCI government officials accountable for their corrupt practices. If it were, the disaffected, disillusioned and disgusted people of the TCI would have done so long ago.

Instead, we need the British to honor their constitutional obligations to us by convening a commission of inquiry -- not only to investigate the vast scope of these allegations, but also to recover public funds that have been misappropriated.

(“Commission of Inquiry Looms for TCI,” The iPINIONS Journal, March 31, 2008)

Other commentaries, including “TCI Government Attempts to Halt British Inquiry into Corruption,” July 18, 2008, and “The Case for an Interim Government in TCI,” November 14, 2008, attest to the determined and sustained nature of our call.

hall.jpg
Anthony L. Hall is a Bahamian who descends from the Turks and Caicos Islands. He is an international lawyer and political consultant - headquartered in Washington DC - who also publishes a current events weblog, The iPINIONS Journal, at http://ipjn.com
As indicated, local leaders betrayed “clear signs of political amorality, immaturity and of general administrative incompetence.” This fostered a culture of systematic corruption -- highlighted by Misick using the tourism budget to fund his Hollywood lifestyle.

It speaks volumes that the Commission of Inquiry Report we sought reads like an indictment against a notorious crime syndicate.

In August 2009, the British suspended the TCI Constitution, stripped local leaders of all political powers, and resumed direct rule. A UK Special Investigation and Prosecution Team (SIPT) duly arrested Misick, four members of his official cabinet, and five members of his “kitchen cabinet,” and charged them with multiple counts of fraud, corruption, and money laundering.

The defendants paid millions (using ill-gotten gains, presumably) for lawyers to file frivolous motions to delay the inevitable. In fact, their trial finally got underway just weeks ago (on December 7).

Only God knows how long proceedings will last (estimates range from six to nine months). The evidence is such, however, that it will take a miracle for any of them to be acquitted on all counts….

In any event, the British returned self-rule to the TCI in November 2012, after local elections for a new government. I pledged at the time to eschew commenting on politics there from my perch here in Washington, DC.

But then came the Value Added Tax (VAT). Specifically, local leaders opposed efforts to implement it with the same kind of anti-British rhetoric with which they opposed calls to suspend the TCI Constitution five years earlier. I felt obliged to break my pledge.

Here, in part, is how I did in “TCI Looking to CARICOM (et al) to Repeal VAT,” February 5, 2013.

 

_________________

I fear our newly elected leaders are manifesting the same kind of political immaturity and administrative incompetence that doomed their predecessors.

Exhibit A is the misguided appeal these new leaders are making to CARICOM to prevent the British from implementing VAT. After all, Misick and his cronies wasted lots of time and money making a similar appeal to prevent the British from suspending the Constitution…

Like the old government, our new government is willfully mischaracterizing the British government’s constitutional duty to ensure good governance and sound fiscal management as a neo-colonial conspiracy to “keep us subjugated.” Never mind that I’ve been calling our local leaders’ bluff on this canard for years.

Notably, I challenged no less a person than Misick to stop scapegoating the British and hold a referendum on independence. After all, he made quite a show of promising to do so, and the British have always promised to facilitate it.

I congratulate Premier Misick on this historical accomplishment [of becoming our country’s first premier]. More importantly, I encourage him to lead in such a way as to inspire the spirit of independence in our people -- not as a jingoistic badge of honor, but as a self-actualizing and sustainable fact of life. After all, our pending referendum should not question whether we want (or are prepared for) our independence. It should present us with the opportunity to declare it!

(“Hail Premier Misick!” The iPINIONS Journal, August 11, 2006)

Ironically, if he had honored his promise, Misick would not be on trial today, facing decades in prison. But I digress.

The British government is proposing VAT as the fairest way to generate a reliable stream of revenues to fund government programs. Our new government is not only opposing it, but acting as if defeating VAT would automatically generate similar revenues.

Intelligent minds can differ on whether VAT is good for the TCI. But it’s demonstrably specious for local leaders to insist that VAT will destroy our economy. Especially given that VAT is providing fair and sustainable revenues in regional countries like Antigua, Barbados, and Jamaica.

Barbados’ former prime minister and eminent Caribbean statesman, Owen Arthur, has described value-added tax (VAT) as the best option for the Caribbean region in the age of trade liberalization.

(Tax-News, London, 12 August 2010)

I agree.

__________________

As it happened, though, the British deferred to local leaders on VAT. No doubt they were exceedingly sensitive to complaints about imposing their “neo-colonial” will. They had just returned the TCI to self-rule under a new Constitution, after all.

However, I knew it was only a matter of time before local leaders became hoisted by their own petard. Confirmation came over the Christmas holidays in the form of a refreshingly honest admission by no less a person than the TCI minister of finance.

Minister of Finance Hon. Washington Misick is beginning to regret his decision to side with opponents of the British-piloted Value Added Tax proposal…

He hinted that those who opposed the VAT did so because of personal interest and not that of the country…

‘I think we, at that particular point, allowed the messenger, who was the wrong messenger, perhaps at that time in our history to influence us together with the persons who want to keep their books closed.’

(Turks and Caicos Sun, December 18-25, 2015)

Incidentally, Minister Misick is the older brother of the disgraced former premier now sitting in the dock. His admission suggests that his younger brother is capable of some contrition … someday.

But the minister is being a little disingenuous. For I recall all too well how his brother scapegoated British politicians for policies he implemented as premier, which had him bankrupting the country to live in his version of a gangsta’s paradise. Now he’s scapegoating expatriate businessmen for policies he implemented as finance minister, which have him taxing poor TCIslanders to the gills to justify his decision to oppose VAT.

I just hope he appreciates how much this admission impeaches his professional judgment. The congressional Committee on Ways and Means writes the US tax code. This admission is rather like the chairman of that committee admitting that lobbyists for gun manufacturers influenced him to have their profits exempted from taxation.

Still, to be fair, the Minister has just cause to regret relying on a Blue Ribbon Commission on taxation to vindicate his opposition. After all, the so-called experts on this commission “misled” him to believe they could either devise viable alternatives to VAT or, with time, structure a way to “properly implement” it.

They’ve had over two and a half years to deliver. Yet, evidently, the only thing he has to show for their expert advice is regret that his government did not heed our advice to implement VAT, as the British proposed, in the first place.

The prevailing point is that local leaders stoked anti-British resentment to oppose suspension of the Constitution in 2009 and implementation of VAT in 2013. And much of what passes for political debate in TCI still reeks of such ignorant, impudent, and self-defeating resentment.

Interestingly enough, their visceral antipathy is such that I have often analogized the relationship our leaders have with the British to that which Republicans have with President Obama. In each case, even if the latter proposed foolproof measures to reduce violent crime, guarantee full employment, and sustain economic growth, the former would oppose them.

Meanwhile, since demanding premature return to self-rule, local leaders have done little more than turn our country from a tranquil tax haven for foreigners into a crime-ridden tax trap for TCIslanders.

Hope springs eternal that they will develop a mature and constructive relationship with the British. Or, perhaps they will finally find the courage to put their money where their mouth is and petition for independence.

Their record of administrative incompetence is such, however, that I hope local leaders pursue the former … with due humility and respect. The fate of the long-suffering people of the TCI depends on them doing so….

Related commentaries:
Commission of inquiry looms
TCI looking
Case for an interim government
Open Letter: TCI Commission of Inquiry
Hail Premier Misick

 
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Comments:

Jerzy Kolodziej:

Mr. Hall, as always your article is devoid of any reasoning as to why the introduction of VAT would be of benefit to the TCI. You have for some reason clutched at the straw presented by some misconceived and mischievous comments made our Minister of Finance; comments that were motivated for reasons completely unrelated to the welfare of the TCI economy.

The economy of the TCI is doing exceptionally well, particularly if it is to be compared with "Barbados". It is paradoxical that Barbados was the first to adopt VAT in the Caribbean! Yet Barbados has been in stagnation for a decade, struggling to reach 1% growth. VAT non compliance is at a record high.

All the while the TCI is out growing all of it's competitors and has all but eliminated it's public debt. "The UK continues to work with TCI to ensure that reforms in good governance are embedded for the long-term.

The economy is performing well and the budget continues to deliver healthy surpluses (estimated $14 million in 2015/16). Gross domestic product (GDP) growth reached 4.6 per cent in 2014." Baroness Anelay of St Johns Minister of State, UK. It mystifies me why you are still banging on about VAT?

The allegation that the "No to VAT" movement was motivated by self-interested parties that didn't want the UK prying into their accounts is a totally inconsequential reason for the opposition. The fact that VAT is a very bad fit for the TCI economy really being the first and last reason that myself and a large group of people campaigned to avoid it.

It is not that we consider that VAT is a bad tax. It is an excellent tax in the right circumstances, our opposition is not ideological (unlike the UK). It should be remembered that the benefits of VAT are only realized when there are multiple stages of production or distribution. Value must be added at each stage of the chain. If there are no stages and no chain, no exports and everything is imported (usually in the finished form), there is little if any difference between VAT or import duty as a consumption tax. The difficulty is that around 70% of VAT would be collected at the border as goods come in at the same time and way as duty (and by the same staff); leaving only 30% or less to be collected domestically. The administrative costs and reduced compliance of VAT, compared with import duty, makes it uneconomic to create a large bureaucracy to collect a relatively small amount of tax domestically.

There simply is no real benefit in introducing VAT as a tax vehicle.

Other specious and frankly ridiculous reasons are also raised as possible reasons why VAT may be beneficial such a international trade for instance. Our system of duty is not a trade barrier at all. We do not produce anything to speak of. Therefore there is no advantage to our domestic goods; there are none. We do not need to be part of free trade area, or system, because we would only benefit if we had something to export.

I am afraid it is Mr. Hall that is guilty of rhetoric in this case. The same rhetoric and ideology that the UK and EU have been trying to foist on us for many years. The case for VAT in the TCI is non-existent, the facts just do not support it. At the end of the day it is just another kind of tax that is better suited to larger places that export at least something!

To go back the the real reason for the the sudden interest of our Minister of Finance in revisiting VAT. Unfortunately it is not for the welfare of the islands, but because the UK is dangling the carrot of loosening the stranglehold they have on government spending through their Chief Financial Officer. Mr. Missick wants to spend our money, free of UK control; does that sound familiar?


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