Britain says it will not impose a value added tax (VAT) in the Turks and Caicos Islands (TCI) after both the government and the opposition said they were against the tax measure.
Foreign and Commonwealth Minister with responsibility for the Caribbean, Mark Simmonds, in a letter to Premier Dr Rufus Ewing, indicated, however, that London is of the view that the TCI government has a responsibility to ensure sound finances in the British overseas territory.
"This includes constraining expenditure within the legally binding fiscal framework which is now in place and being able to refinance its debts in 2016 without a further UK Government loan guarantee," the letter said.
London maintains that the VAT would provide a more stable, fairer and broader based system of revenue for TCI than that which is currently in place.
Premier Ewing had sent a letter to Simmonds on January 29 raising a number of concerns about the proposed implementation of the VAT from April 1 this year.
In his response, Simmonds said that the TCI government will face more difficult choices to ensure stable and sustainable revenues and expenditures in the absence of VAT. He added that London "is clear that we will not accept a return to the dire financial situation in TCI which prevailed before the interim administration".
Simmonds said that he would be monitoring the situation in the TCI very closely. "I cannot and will not allow a reversal of the progress that has been made by the interim government, which is a vital component for the reputation of the TCI and its people," he said.