The UK Government has agreed that VAT will not be implemented in the TCI at this time. The TCI Government and opposition have clearly stated their opposition to the implementation of VAT.

It remains Her Majesty’s Government’s (HMG) view that VAT would provide a more stable, fairer and broader based system of revenue for TCI than that which is currently in place.

The Government  of TCI has a responsibility to ensure sound finances in the 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 TCI Government will face more difficult choices to ensure stable and sustainable revenues and expenditures in the absence of VAT.

HMG is clear that we will not accept a return to the dire financial situation in TCI which prevailed before the Interim Administration.

FCO Minister, Mark Simmonds, issued a letter to TCI Premier the Hon Dr Rufus Ewing yesterday evening, Mon, 25 Feb 2013. This was also sent to the Leader of the Official Opposition in the TCI simultaneously. This was issued in response a letter from the TCI Premier dated 29 January 2013* which raised a number of concerns about the proposed implementation of VAT in the TCI from 1 April 2013.

*See attached