Background to the present situation:
FISCAL AND ECONOMIC REPORT ON ASCENSION ISLAND (18/02/2002)
Financing public services
The island’s ‘common services’, elsewhere called public services, but including shops and clubs, are provided by a hybrid joint venture – Ascension Island Services (AIS) - directed by a London board of the island’s Users. Funding for these services comes from the Users via an employment levy. This situation functioned for many years but change has come from several directions. The main employers are no longer para-statals but profit-motivated private companies with fixed price contracts in competitive global markets. Changed geo-political priorities and new technologies reduce the strategic importance of Ascension Island’s location. And rising salaries and falling employment levels have significantly increased the cost of the capita levy.
The London board has signalled its intention to disband the joint venture on 31st March 2001. In divesting itself of its responsibilities for providing common services, the London Board leaves a vacuum. A way must therefore be identified of either reviving the current funding arrangement or of replacing it with a more conventional system for financing public services. Whichever route is chosen will determine the future of Ascension Island.
Two principal models for funding service delivery emerged from the on-island consultations: the modified status quo option and the public finance option.......
Current Status:
Ascension : Taxing Questions
Taxation was introduced on Ascension in 2002. It replaced the previous arrangements whereby employing organisations operating on the island (known over the years as the LUC, “the Users” and other names) jointly funded and provided services on the island through a joint venture, Ascension Island Services. Those who were here in those days will recall that for example the BBC built and managed Two Boats School and ran the hospital and even took care of recruiting staff. Other organisations were intimately involved in running services on the island in similar fashion. This system came under increasing strain because of difficulties over agreeing on how much each should put in the pot – and finally by the late 1990s the Users announced that they no longer wished to provide services in this way, and wanted to concentrate on their core businesses. The Ascension Island Government took over the running of the common services, and taxation replaced the previous financing arrangements that the Users had relied on.
Under the system drawn up in 2002, revenue is raised through property tax (which is paid by employing organisations only), income tax (paid by individuals) and duties on fuel, alcohol and tobacco. The arrangements for setting up the tax system included an agreement whereby employing organisations gave their staff a one-off increase in pay so that after the deduction of income tax, they were no worse off. In one or two cases the employing organisations pay the employee’s income tax directly on their behalf.
Seven years on it is time to have a rethink of the tax regime operating on the island. Many feel that property tax is unsuitable for our circumstances. One of the problems is that it can act as a disincentive to look after and improve on buildings, as this could then attract a higher valuation, and a higher tax bill. And neither tax takes into account the effect of the downsizing that has taken place since 2002 – resulting in less revenue in property and income tax, and some duties, while medical services still have to be provided, supply ships need offloading, roads repaired, policing provided and so on. Whoever is running the services, whether AIS, the Agency, or AIG, needs to be as efficient as possible to reflect the lower numbers of people using the services, but some things remain constant – a good example is the dentist. We need one whether we have 1,000 people on the island or 500. As I have said in previous communications, the AIG is committed to ensuring value for money for the taxpayer and a process of modernisation and reorganisation is already underway to achieve that.
The Ascension Island Government has commissioned Jeffrey Davenport, a tax specialist from the United Kingdom’s HMRC (Her Majesty’s Revenue and Customs), to examine the tax system, consider the problems and complaints about it, and advise on an alternative tax system for raising finance to provide the services that people living and working on the island use. Jeffrey will be on Ascension from Monday 26th October for two weeks. He will be consulting with the Island Council, employing organisations and other interested parties to ensure he has a sound understanding of our needs and issues so that he can come up with alternative ideas for us to consider. If you would like to bring any issues to his attention you should approach one of your elected representatives, or alternatively you can address a letter to him as follows:
Jeffrey Davenport, HMRC
c/o Administrator’s Office
Georgetown
R P Denny
Administrator
Ascension Island
13 October 2009