GST hike in Maldives ‘inevitably’ needs to proceed- Govt, IMF, WB

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In August 2022, the government submitted bill to increase the TGST bill from 12% to 16% and GST from 6% to 8%. During the committee stage, the Whole House Committee approved the bill with 50 votes in favor. 19 members voted against it.

On Nov 14, amendment proposed by the government to increase GST and TGST, was concluded without taking any votes in the Parliament session. Parliament did not decide on the tax hike amendment due to insufficient quorum.

On Nov 15, the Parliament session was once again concluded without taking the vote on the government’s proposal for the second consecutive day. Speaker Nasheed took vote for only the Chagos resolution saying that rules of the parliament require votes can be taken on matters that has been completed in the day’s work. He then announced that a session would be held tomorrow.

Hearing the statement, some MPs in parliament have expressed their dissatisfaction. Some members of the Nasheed faction refuse to pass the bill. PPM members were also protesting outside the parliament against the passage of the tax bill

Criticism: The decision has directed criticism at the government by both the public and businesses alike. There are concerns that the increase in the TGST will have an adverse impact on the economy. It has also been stated that the new tax increase proposal was not something any country has done and was proposed in a hurry.

The statement further said the International Monetary Fund (IMF) has advised the government to increase taxes without knowing the true economic situation in the Maldives, especially that of the tourism industry.

Supporting statements: The government on the other hand has said that the tax increase is a step to manage the economy and is not intended to impose restrictions on anyone. Presidential Spokesperson Miuwan said the tax rate should be increased due to changes in commodity prices in the global market. There is no bases for the claims that tax increases will harm the economy.

The IMF and the World Bandk have also recommended changes in the tax rate in the Maldives,” he said.

Furthermore, he also said that the change will not have a significant adverse impact on income, that employment opportunities and job security will increase once the economy is properly managed.

IMF to Maldives: A delegation from IMF visited the Maldives in late June 2022 to asses the country’s economic situation. The group said that the measures the government intends to implement to improve the economic situation in the Maldives are reasonable. The statement further said that the decision to increase taxes would allow for the rapid implementation of reforms needed to ensure fiscal and debt sustainability.

In a World Bank report, Faris H. Hadad-Zervos, World Bank Country Director for Maldives, Nepal and Sri Lanka said “The government’s proposed general GST and tourism GST rate hikes are a meaningful step towards a fiscal adjustment, but more is needed, especially on the expenditure side, including reducing the fiscal burden of state-owned enterprises and better managing the provision of several subsidized goods and services.”

He also posted a tweet saying, “Urgent tax hikes are a meaningful step to increase revenue.”

While many are uncomfortable with the idea of increasing taxes, Finance Minister Ameer has said that decisions regarding the Maldives’ economy will continue to be taken with the advice of financial institutions working with the Maldives