Mr Hugh McGravel Groves
Chief Financial Officer (“CFO”)
Ministry of Finance over the Minister
Turks & Caicos Constitution
Turks & Caicos Islands
Dear Mr CFO:
Please permit me to be naïve about Value Added Tax (“VAT”), the idea and its basic assumption. There is the widespread fear and tangible belief in the minds of everybody and the community at large that VAT will increase prices, be inflationary and eventually sink the TCI’s economy in short order. Yet in response to the valid position of the PDM in opposing VAT the Governor’s spokesman stated that
“It was reported at the PDM news conference that VAT implementation will...
1. ... increase the cost of living in the Turks and Caicos Islands
This is not the case. There is a wide range of VAT exempt and zero rated items – the costs of these should remain similar to pre-VAT. Customs duties have been reduced by 10-15% to accommodate the introduction of VAT: exempt items still have reduced duty applied; zero rated items allow business to claim the VAT back from Government. Also VAT in the TCI is designed to mostly be a replacement tax taking over from hotel and restaurant accommodation tax, reductions in customs duties, vehicle hire stamp duty, domestic financial services tax, and telecommunications tax.”
This response and its effect is the source of my naiveté that customs duties have already been “reduced by 10-15% to accommodate the introduction of VAT”:
This “reduction" of 10-15% (the reduction) already took place that you are referring to and there is no evidence that merchants, importers, Wholesalers, retailers, (the marketplace) have passed that reduction onto the consumer.
In fact there is every indication that after the reduction, that the market place has actually increased prices and the cost of living has gone up.
I am suggesting that the reduction had a reverse effect already, is already inflationary, and has resulted in at least a further 10% increase in the cost of living in the TCI.
On top of all this, your suggested reduction in prices and our perceived increase in prices you are proposing a further 11% increase in taxes through VAT to create what you are calling a steady, reliable, consistent predictable supply of revenue.
Mr CFO we pray that you and the apologists for VAT are correct and that somehow prices will come down. We note that you are not moving forward but have hinted that you may consider employing already existing legislation that will enable you to control prices. We suggest that you move to employ some kind of price control, some kind of pressure on the market place and abandon in the face of VAT your “free market orthodoxy”. I am suggesting that VAT is a further restriction on market freedom therefore, as a result of VAT; the “market” is not entirely free. Merchants etc. should not be free to gouge, increase prices and ignore the reductions you have mentioned in the 10-15%.
While I am worried and convinced that VAT will fail I hope your position is sustained because of the sake of the economy and the people. If you succeed and prices do go down we will be the first to congratulate you. But please tell me how you intend to ensure this when after the reductions prices have already gone up.