By Hayden Boyce SUN Publisher & Editor-in-Chief

Residents of the Turks and Caicos Islands will have to pay a whole new set of taxes, including a ten percent tax on the consumption of electricity and water, from April 1st, 2011, and more soon after.
As part of its new tax reform package, the Interim Government has announced some new revenue measures which are designed to secure a more sustainable source of funds to improve Government’s revenue and ensure that this country can pay its own way.
Government’s financial year starts on April 1st, and according to the Tax Reform bulletin which was released to the media, there is a proposal to introduce temporary taxes on the consumption of electricity and water for the financial year  2011 to 2012, plus a proposal to introduce a temporary tax on Bank and Insurance service. Charges over that same period.
In answer to the question that electricity and water are already too expensive in TCI, and why should we consider taxes on electricity and water to further increase the cost of these utilities, the TCIG stated: “It is still necessary to generate additional revenue to assist in the reduction and eventual elimination of the fiscal deficit. Preparations for VAT implementation usually take between 18 and 24 months. However, the introduction of a sales tax on the consumption of electricity and water would not only generate a significant revenue stream quickly but also facilitate future VAT introduction. If VAT were to be introduced it would apply to both electricity and water consumption.”
The introduction of a 10% sales tax on the consumption of electricity and water would generate around 5 US$ million per year. 10% is the likely rate for VAT in TCI.
It was explained, however, that the proposal is to have a separate threshold for monthly usages of electricity and water, below which, consumers would not be subject to either tax.
The TCIG is undertaking a study to establish the thresholds under which the electricity and water taxes would not apply.
So whatever the threshold is established it would appear, for example, that a family of six that uses significant amounts of water and electricity and would be subject to the water and electricity taxes whereas a family of two would use significantly less and may not be subject to the taxes.
There is also a proposal to implement a Value Added Tax (VAT) and a proper structure of excise taxes.
According to the Interim Government, if VAT is introduced, the Accommodation Tax, the Stamp Duty on Vehicle Hire, the temporary Electricity sales tax, the Water sales tax, and the Bank and Insurance Services Tax would be repealed and customs tariffs would be reduced on average by 50% in the financial year 2013 to 2014.
There is also a proposal to introduce a Customs Processing Fee of 4% and apply it to all imports and importers (except for government).
They are also proposing amendments to an increase in fees, licenses, and charges, because many of the amounts associated with fees, licenses, and charges have not been adjusted for some time. For example, the TCIG noted, business licenses were introduced in 1996 and have not been adjusted to reflect the effect of inflation (36%). 
In most cases the increases will be around 35%. However some fees and charges will be eliminated. The cost of licenses, fees, and charges will be reviewed on a periodic basis and adjusted accordingly..
In terms of what will be eliminated, the TCIG listed the following:. Administration fee-Business License, Temporary work permits,  Audit fees, Dental fees, Examination fees, ID card fees, Medical Fees, Salt Cay Boat Fees, Tender Document Fees, School fees, Migrant Health Processing Fees and Taxi meters.
The press statement noted: “Other changes were looked at but these were complex and would overturn last year’s changes which were designed to simplify the customs duty system, help small businesses and improve social welfare. It is fair to say some of these reductions have not been passed on to consumers because of the lack of scale and competition in many business sectors in the TCI.”
Government also proposes to modify the system of fees, licenses and charges to simplify, account for inflation and increase revenue.
There is also a proposal to transform the work permit process into a monthly charge based on the work permit holder’s salary rather than the category of work.
The Interim Government said it will not introduce property taxes because “currently there is no definitive database and it is not the appropriate point in the economic cycle. A low annual property tax is also unlikely to generate significant annual revenue”.
Explaining why it should look at Customs to raise more revenue since it already changed tariffs in July 2010, the TCIG stated: “ Evaluation of the potential impact of the new tariff structure on revenue was completed prior to the introduction of the tariff changes last year. Unfortunately, a lack of data on demand forced the use of static scenarios that did not take into account the different import elasticity of the construction, hotel and restaurant sectors. The assumption that import values would be proportional to total GDP did not work as anticipated. TCI imports are heavily dependent construction rather than on other economic sectors. With the construction sector at a standstill, imports did not reach previous years’ levels and revenues fell.
Consequently,changes are required to generate additional revenue to compensate for the expected lower value of imports in the forthcoming years.”
It added: “An immediate fix involving a “one off” increase of the tariff rate across the board and the elimination of most exemptions in place is considered to be the simplest and fairest way to improve revenues. However, since the elimination of the exemptions will require new legislation and it could not be completed in the short-term, a flat rate Customs Processing Fee (CPF) on all imported items can be implemented by April 1, 2011, and is consistent with Customs Processing Fees present in many other Caribbean countries.”
In relation to whether the Customs Processing Fee (CPF) affect the price of food, the TCIG stated: “ The 4% Customs Processing Fee (if approved) would apply to the value of all imported goods, including food. Consequently there is likely to be an “one off” increase in the price of food.”
It was also noted that currently there are many organizations and individuals such as Statutory Bodies, Charities, Youth Organizations, Sports Clubs, Museums, Public Servants and Taxis and Passenger Carrying Vehicles and some developers who enjoy an exemption from customs tariffs. The CPF will apply to everyone who imports except for government.