PROVIDENCIALES, Turks and Caicos Islands - THE acting governor of the Turks and Caicos Islands has signed into law a value-added tax to shore up the finances of the troubled British territory.

An 11 per cent tax will be levied on a range of goods in the island chain south-east of The Bahamas starting next April. A government statement says the rate is the second lowest in the Caribbean region, after Haiti.

The law signed yesterday contains a number of exemptions, including fruit, vegetables, fresh meat and hurricane supplies. The value-added tax (VAT) is intended to stabilise the finances in an island chain placed under direct rule by Britain in 2009 amid allegations that local officials had taken payoffs from developers.

"VAT implementation here is about providing our essential public services with a more predictable, regular and stable cash flow," said Acting Governor Patrick Boyle. "If we can harness the energy and creativity of TCI's businesses, I am sure that we can be successful together."

Elections making way for a return to local rule are scheduled for November.

The tax regulations are still being finalised and will be published in the next eight weeks.

In addition to clarifying all the zero-rated and exempted items, they will also set out how the Government intends to apply the VAT to each industry sector.

The effective rate of VAT to be charged is the second lowest rate in the Caribbean region, after Haiti, and is the same level as accommodation tax currently charged in the TCI.

Water, electricity, exports are to remain tax exempt, along with basic food items, certain contruction materials, fuel and medical services.

Import duties will also be generally reduced by between 10 per cent and 15 per cent to offset the effect of the new tax on imports.