The United Nations Economic Commission for Latin America and the Caribbean (ECLAC) has called for measures to tackle nonpayment of taxes, cautioning in a just released report that tax evasion is one of the main weaknesses of the tax systems in the region’s economies, accounting for US$320 billion dollars in 2014.

Tax revenues are the cornerstone of the basic financing of modern State, and it is therefore vital to prioritize the creation of a tax culture in which evaders are effectively punished, according to the ECLAC document, ‘Fiscal Panorama of Latin America and the Caribbean 2016’, which was launched earlier today.

The ECLAC report states that fiscal non-compliance represents 2.2 points of gross domestic product (GDP) in terms of Value Added Tax (VAT) at the regional level, and 4.1 GDP points in terms of income tax. While ECLAC said it acknowledges the difficulties of bringing those numbers down against a backdrop of reduced economic buoyancy, it called for increased efforts to avoid a substantial loss of potential tax resources.

According to the document, there was an across-the-board decline in VAT evasion up to 2007-2008, although that favourable trend was reversed due to the financial crisis. The Commission describes the need for more in-depth reforms of the structure and administration of VAT. Similarly, with income tax evasion there has been no significant progress in recent years.

The Fiscal Panorama 2016 states that, Latin America recorded a slight average reduction in fiscal accounts, and reached a fiscal deficit of three per cent of GDP and public borrowing of 34.7 per cent of GDP last year. Out of the 19 countries studied, 11 simultaneously increased their fiscal deficit and public debt as a proportion of GDP.
According to the report, the slowdown in economic growth and the worsening terms of trade have had dramatic effects on the public finances in many of the region’s countries, with many having to carry out significant fiscal adjustments.

ECLAC outlines an uneven future at the regional level, with most South American countries remaining saddled with uncertainty because of the slowdown in China and other emerging nations in 2016, while Mexico, Central America and the Caribbean will benefit from positive growth rates, and from falling oil prices in the latter two sub-regions.

In order to protect and boost public investment and growth, the United Nations Economic Commission highlights the need to strengthen counter-cyclical institutional arrangements to reduce harmful cycles of expansion and contraction of public spending. Fiscal adjustments should therefore aim to attract investment that leads to growth, according to ECLAC.
The report affirms that 2015 was marked by a loss of income from non-renewable natural resources, although this was offset by higher tax revenues resulting from reform. On average, the region increased its tax burden by 0.2 per cent of GDP, mainly thanks to improved collection of income tax.

The main conclusions of the Fiscal Panorama of Latin America and the Caribbean 2016 will be presented at the first session of the XXVIII Regional Seminar on Fiscal Policy, which will be opened tomorrow.

Minister of Finance, Hon. Washington Misick today announced the re-launch of the TCI Financial Services Working Group. Comprising of senior government representatives, leading members of the private sector, and the CEO of Invest TCI.

The Group has been formed for the purpose of creating and implementing a strategy to grow the financial services industry in the Turks and Caicos by sponsoring and helping to implement new legislation, new products, and better regulation to support the growth and development of an international financial services industry.

Hon. Misick stated; "With the recent welcome modernization of our Trusts law, we have begun our work to create the legislative support for a thriving financial services industry in the Turks and Caicos. TCIG, supported by the Group, is about to embark on a substantial exercise to update our Companies and Insolvency legislation in consultation with the private sector, and we are actively pursuing a number of initiatives with the goal of creating a thriving financial services industry that can provide Government revenue, and good quality, professional careers for Turks and Caicos Islanders."

The UK Minister of State for International Development, Mr Desmond Swayne, made the following written statement to the House of Commons of the British parliament on 25 February:

“I wish to bring the House up to date with respect to the loan guarantee from the Department for International Development (DFID) to the Turks and Caicos Islands Government (TCIG).

On 28 February 2011, my Right Honourable Friend, the then Minister of State for International Development (Alan Duncan) informed the House that DFID had finalised a guarantee in favour of Scotiabank (Turks and Caicos) Ltd to provide TCIG with access to a maximum capital amount of US$260m over five years. He argued that the assistance would allow TCIG to implement budget measures which would lead to achieving a fiscal surplus in the financial year ending March 2013.

I am pleased to announce that on 22 February TCIG repaid its remaining borrowing under this guarantee on schedule and with an outstanding borrowing need of just US$28m. It was able to raise this amount without further recourse to the UK government for support and is expected to repay that loan over the next three-and-a-half years.

TCIG has progressed from deficits of US$77m in financial year 2010/11 and US$29m in 2011/12 to a surplus the following year and strong surpluses thereafter. TCIG and the TCI public service had to make a number of difficult decisions and sacrifices. Financial management and oversight has been strengthened. Essential investment was maintained, including an expansion of the international airport that has allowed a significant increase in flights from US cities. The successful conclusion of DFID’s guarantee is a credit to the resolve of the TCI public service, TCIG, the Governor’s Office and UK-financed technical experts.”

The Turks and Caicos (TCI) Government repaid its $170m guaranteed bond, thereby completing the refinancing of its UK guaranteed debt, on Monday, 22 February 2016.

The $170m bond was originally issued by the TCI Government in 2011 as part of the $260m UK Government guaranteed refinancing. The bond was repaid from a combination of $142m of cash and a $28m loan (provided by RBC and announced last month). The balance of the $260m had already been repaid in 2014/15.

"This is a moment to exhale and thank the Almighty for his favour! The convergence of sound fiscal management, vigilance of ministerial colleagues, the hard work of TCI public servants, the forbearance of the TCI people and the co-operation of the UK together with our international and regional partners have paid off", said Minister of Finance, Hon. Washington Misick. "I especially thank senior staff in the Ministry of Finance, the CFO and the Debt Refinancing Advisor for their role in the new arrangements for the residual balance of the debt. TCIG now has breathing space to fully reassess measures for widening the fiscal space in order to spread the benefits of growth more broadly. It however must be said that the financial prudence that has brought us here must become a hallmark of TCIG's governing principles."

"The repayment of this bond, and with it the removal of the UK Government guarantee, marks a very significant step in TCI's financial rehabilitation. In the last few years TCI has undergone a major turnaround, not only in its economy and government finances, but also in its international reputation. With its booming economy, BBB+ credit rating and healthy government finances TCI is in an enviable position in the region – both to invest in the socioeconomic development of its people and to attract foreign direct investment into the local economy", said Premier, Hon. Dr. Rufus Ewing.

TCIG's Chief Financial Officer, Stephen Turnbull commented; "This is the culmination of five years' work by TCI Ministers and civil servants, UK Government officials and a range of international advisers to TCIG. Creating such a rapid and dramatic improvement in TCI's financial situation has necessitated rigorous cost controls and a cautious approach to new investment. With this period of 'belt-tightening' behind it, the people of TCI, acting through their Government, can now enjoy new autonomy to focus on the priorities that matter most to them".

Governor, H.E. Peter Beckingham also welcomed the repayment, adding; "I know that UK Ministers are pleased that the bond has been repaid on time. It was necessary at a critical juncture for Turks and Caicos Islands, and meant that the country has been able to re-establish its economic stability. I would like to record my gratitude and thanks to a great many people in TCI, in the House, Ministers, public servants and UK advisers who have helped steer TCI to what is now an increasingly enviable financial position in the region.

"But there is no room for complacency, not least given our dependence on tourism, which can be fickle. We must all continue to look at expenditure carefully, and keep in place the necessary mechanisms to ensure our finances remain robust. I, and most importantly external observers, are confident that we will."