Note: In those Caribbean economies where VAT has remained unchanged, such as Trinidad and Tobago, net revenue to government from VAT has fallen. In economies like Barbados, VAT arrears have become unsustainable.
TONIGHTS SPEAKERSDrexwell Seymour, LIME - ModeratorNick Haywood, PricewaterhouseCoopersKen Adams, DoIt CentreStacey Cox, Hotel & Tourism AssociationSam Slattery, Grace Bay Medical CentreEdith Cox, The Graceway GroupRev. Conrad Howell
Extrapolation of chart from Roe Report (Figure 1, Page 15) & TCIG 2012/13 Budget
NICK HAYWOOD Partner PricewaterhouseCoopers RepresentativeTurks & Caicos Islands Society of Professional Accountants WHAT IS VAT?
WHAT IS VAT?•VAT is a tax that is added on to most things you buy,both goods and services•VAT is collected from you by businesses and paid toGovernment•VAT does not result in businesses paying more tax•Businesses will collect VAT from you and me, and payVAT on what they buy. The difference between thoseamounts will be paid to, or collected back fromGovernment.
HOW WILL VAT AFFECT YOU?• VAT will be added to most things you buy at 11%, so prices will go up• Most “Zero rated” items won’t go down in price, they are already exempt from import duty• Duty rates are expected to reduce by 11% on VATable products, but VAT will be charged on imports, so the cost of most imports will not reduce
WHY DON’T BUSINESSESWANT VAT?• VAT is more complicated than what we have now• Businesses areprices highercustomers will buy less, because VAT will make concerned• Even they don’t think it is rightwill TCI less tax under VAT, though some businesses for pay• Small businesses costs initially bebusiness will back VAT on purchases, so won’t to small able to claim increase
WHY IS VAT NOT RIGHT FOR TCI• VAT is being designed for TCI to collect the same amount of tax• VAT is more difficult to enforce• VAT IS CHANGE FOR THE SAKE OF CHANGE, IT ADDS NOTHING EXCEPT COST FOR YOU, COSTS FOR MOST BUSINESSES, AND COSTS FOR GOVERNMENT
Stacy Cox Association ExecutiveTurks and Caicos Hotel and Tourism Association HOW WILL VAT AFFECT TOURISM AND ME?
•• Employs more than 50% of the population• Positive growth forecast for 2012
•VAT rate of 11%, registrants of the Hotel and Restaurant Accommodation tax base will see almost no change but the revenue base will be broader as all sales types will be taxable
• A sustainable tax base system on the back of the consumers
Turks & Caicos Resort Economic Council Position on Value Added Tax VAT
TCREC Concerns on VAT in TCI• Intellectual Justification Unknown• Timing and Pace of VAT process• Absence of BETA testing• Groundless Revenue Projections
TCRECVAT and the Maturation of the Condo-ResortModel: •The Condo-Resort Community has just come to the end its first phase of development. •Turks and Caicos is the “Superpower” in Condo-resort development. •In our second phase, likely to be based largely on client with fixed incomes, VAT would weaken and could destroy TCI’s dominant and competitive position.
TCREC VAT Rate History in the CaribbeanCountries Introductory VAT Rate Current VAT RateJamaica 10% 17.5%Dominican Republic 6% 16%Grenada 10% 15%UK About 10% 20%
KEN ADAMS CEO Do-It Centre/Building MaterialHOW WILL VAT AFFECT ME WHEN I BUILD OR MAKE REPAIRS TO MY HOME?
SAM SLATTERY Physician/Business Owner Grace Bay Medical Centre Member National Health Insurance BoardHOW WILL VAT AFFECT MY HEALTHCARE?
VAT EXEMPT“Exempt supplies are those goods and services that are not directly subject to VAT. VAT cannot be charged of the sales of exempt supplies. Persons engaged in supplying exempt goods and services cannot claim tax credit on purchases associated with exempt supplies.”“It is important to note that only goods and services will be exempt not businesses or individuals”From Value Added Tax White Paper July 2012
ZERO RATED“Zero-rated supplies are goods and services that will be taxable but at the rate of zero percent. Even though a zero percent is charged on supplies to the consumer, a VAT registrant is allowed to claim input credit on inputs used in making zero rated supplies.”From Value Added Tax White Paper July 2012• Fortis will not charge VAT on your electricity• Fortis will able to claim back any VAT they pay at the port for anything associated with making electricity• Could be a good thing as Fortis might be able to lower their prices
VAT AND HEALTH CARE• No VAT on Medical Services but there will be VAT on office supplies etc.• VAT is on goods and services not businesses• Maybe VAT on medical disposables?• Won’t be able to claim back the VAT paid• Cost are expected to go up and if costs go up fees and charges will also have to go up
PHARMACY• Most Prescription items will be Exempt• It appears over the Counter Medication, eg Cough and Cold medicines, Vitamins and Health products will increase in price as they will be subject to VAT• Pharmacies can claim back VAT paid in proportion to the amount of business that is VATable or Zero Rated but not on Exempt services• The complexity will require increased administrative effort and increase costs
EDITH COX CFO The Graceway GroupHOW WILL VAT AFFECT ME AT THE GROCERY STORE?
As from April 1, 2013 Everyone in the Turks and Caicos will pay VAT. (Value Added Tax), on all the goods and services they buy, unless they are zero rated or exempt from VAT. Goods imported in the Turks and Caicos after VAT will fall into one of Four Categories: • Items which are duty free and are either zero rated, or exempt from VAT. • Items which are duty free and taxable (subject to VAT) • Items which are dutiable and zero rated or exempt from VAT • Items which are dutiable and taxable – Subject to VAT2
Items which are Duty Free and either Zero Rated, or Exempt from VAT •thell landed beingof thesethere will beno changeon A things cost equal, items, and no effect in the calculated retail price. There will also be no VAT charged at the till so the customer should see no change in price as a result of VAT. •Examples include: Fresh Fruits and Vegetables, Fresh, Frozen and Chilled Meat, Fresh Whole Chicken, Flour, Rice, Infant Formula, Corned Beef, Milk, and Eggs3
Items which are Duty Free, but Taxable (subject to VAT) •There will be no change in the landed cost of the item or the calculated retail price but there will be an additional 11% charged at the till on the selling price of those items. •Examples include: Frozen fruits and Vegetables, Dried Fruits and Vegetables, Frozen Chicken parts, Oats, Grits, Cream of Wheat, etc.4
Items which are Dutiable and Subject to VAT •May be a reduction on the duty charged on these items •Landed cost will be reduced to the extent of the duty reduction •11% addition at the till, which depending on amount of duty increase will most likely reflect a price increase •Examples include: Majority of the Basic Grocery Items including Bread, Water Health and Beauty Aids, Soap, Detergent etc.5
Items which are dutiable but Zero Rated or Exempt from VAT •May be a reduction in duty which will be reflected in the landed cost calculation •Calculated retail price will be lower than it is now to the extent of the duty reduction •Final price to the customer should also be lower because there will be no VAT applied. •Example include: Fish, Sugar, Propane6
REV. CONRAD HOWELLVAT IS NOT SIMPLER, ITS NOT MOREEQUITABLE AND IT S NOT ANY MORE SUSTAINABLE THAN DUTY.
VATAs I see itSimpler?No,Equitable?No,Sustainable?No.Burden? YES!
VAT • Paying Imp Duty on arrival was and is simple. • You will now have to know the new Duty Rate, the VAT Rate, and how VAT is accounted for and paid or reclaimed (if you are Registered). • It takes on a life of its own especially as it relates to accounting and compliance.
VAT • When the burden of this TAX is on the consumer, It is not shared. As a matter of fact, the cost of collection is passed on. • It is personal to the consumer. • It further weakens the middleclass! • It gives rise to poverty!
VAT • VAT introduction in Turks & Caicos is like pouring water into a leaking Tank. • It falls more heavily on the poor, as has been noted in various ways here this evening. • TCI does not Manufacture or Export, thus it is taxing goods and services in TCI, without an arm of
“We are not going to get growth in Europe orBritain by introducing a new tax that wouldactually hit people as well as institutions.I do not think it is a sensible measure and I willnot support it.”David Cameron attending USA for G8 Summit18th May 2012