Maldives Inland Revenue Authority (MIRA) on Wednesday projected a 48 percent drop in its total tax revenue for this year, due to the fiscal and economic repercussions of the ongoing COVID-19 pandemic.
Speaking at a virtual press conference held at the National Emergency Operation Centre (NEOC), Commissioner General of Taxation Fathuhullah Jameel noted that a revenue of MVR 17.2 billion was projected for MIRA in the State Budget 2020.
However, due to the unprecedented circumstances presented by the pandemic, MIRA now expects a revenue of MVR 8.95 billion by the end of the year, which is 48 percent lower than the initial projection.
In a presentation, Fathuhullah outlined five scenarios that might unfold based on the evolving situation and their respective estimated tax revenues:
- Scenario 1: MVR 10.29 billion
- Scenario 2: MVR 9.58 billion
- Scenario 3: MVR 8.95 billion
- Scenario 4: MVR 7.76 billion
- Scenario 5: MVR 6.62 billion
"We're projecting the third scenario as the most likeliest, in which case MIRA will generate MVR 8.9 billion as tax revenue. This is approximately a 48 percent decrease from what was projected in the budget", he said.
Shedding light on this year's revenues so far, Fathuhullah highlighted that MIRA collected MVR 1.8 billion in January, compared to MVR 527 million later in April.
"We collected only MVR 109 million by May 17, and so the numbers are expected to drop further this month", he added.
Fathuhullah attributed the drastic drop in revenue to the tourism deadlock in the country.
Tourism, which is the main source of income for Maldives, came to a halt when the government stopped issuing on-arrival-visas and closed its borders on March 27, in a bid to contain the spread of COVID-19. Although the authorities have tentatively suggested that Maldives might re-open borders in July, no concrete decisions have been made yet.
As over 70 percent of the country’s GDP is attributed to revenue generated by the tourism industry, the economy continues to face severe repercussions due to the local and global travel restrictions imposed over the COVID-19 outbreak. It is estimated that the country will face a shortfall of approximately USD 450 million (MVR 6.9 billion) in foreign currency.
Meanwhile, the Ministry of Finance projected that the state deficit would reach MVR 13 billion this year compared to the MVR 5.9 billion originally stated in the 2020 State Budget, as a result of economic repercussions caused by the COVID-19 pandemic. The ministry also projected that the total state debt sans guarantee would increase to MVR 70 billion, which accounts for 86.6 percent of Gross Domestic Product (GDP). An overall 115 percent drop is projected in the GDP, along with 81.3 percent for nominal GDP.
In a bid to counteract the financial impact of the COVID-19 pandemic on the local economy, the government has introduced a financial relief package with MVR 2.5 billion intended to prevent the closing down of local businesses and the loss of jobs.