The Edition
facebook icon twitter icon instagram icon linkedin icon

Latest

IMF advises against Maldives govt decision for GST hike in 2023

Mohamed Rehan
18 July 2022, MVT 14:05
Ministry of Finance hosts press conference to discuss tax related matters-- Photo: Mihaaru
Mohamed Rehan
18 July 2022, MVT 14:05

The International Monetary Fund (IMF) recommends Maldives government to push back its decision for a hike in Goods and Services Tax (GST) rate until 2024.

Previously, the Maldives Minister of Finance announced ongoing discussions by the government to hike both GST components effective from January 2023.

However, IMF in its June issue of the economic outlook of the Asia and Pacific points to expected repercussions the island nation may face from a tax bump.

IMF additionally noted the economical setbacks owing to a prospective tax hike amid rising inflation of consumer goods.

The global financial institution recommends a phase by phase approach of incrementing GST rates, and stresses to push back the policy until the island nation's economy has recovered to pre-pandemic levels.

Noting on the relation between state policies and stakeholder behavior, IMF suggests the Maldives government to slow down public announcements discussing prospective tax hikes.

Maldives Minister of Finance Ibrahim Ameer addressing the government's decision of incrementing GST rates, adds the global economy has drastically changed since IMF's report.

He noted the Russian invasion of Ukraine had impacted global economy, making it volatile and affecting commodity prices.

The institution in its recommendation identifies comparatively lower GST rates in the Maldives, suggesting to surge GST rates between eight to ten percent in prospective future.

IMF recommends General Goods and Services Tax (GGST) increment from six to eight percent at the initial phase with a subsequent increment from 12 percent to 14 percent in Tourism Goods and Services Tax (TGST).

Mid-term increments for both GST components, from eight to ten percent for GGST and from 14 percent to 15 percent for TGST are acceptable, according to the institution.

The global financial institution suggests bringing both GST components to equilibrium in terms of its rate by the final phase.

Maldives government is currently levying a six percent on GGST and 12 percent on TGST.

Government's decision for the tax hike is following procedural conduct, adds the Minister of Finance, assuring they were locked in discussions with all relevant financial authorities on this matter. He has previously said they were implementing the hike as they believe it is a necessary step to take in this moment.

IMF in its recommendation suggests tax policies for online e-commerce businesses and taxi cabs as well, with a progressive beneficial tax approach for lower-income earners.

Share this story

Related Stories

Discuss

MORE ON BUSINESS