Many tourism service providers have paid tax in advance during the month of January to reduce the tax payable at the inflated Goods and Services Tax (GST) and Tourism Goods and Service Tax (TGST) rates.
Tax revenue fell 21 percent from the estimate in February, according to figures released by the Maldives Inland Revenue Authority (MIRA).
The main reason for this is the advance payment of TGST that was expected to be received last month.
The government received MVR 1.7 billion in taxes last month. However, this is about 50 percent lower than the tax income received in January 2023.
Meanwhile, the tax revenue in January was 70 percent higher than expected. Tax revenue stood at MVR 3.4 billion. This is the highest revenue collected by MIRA in a single month.
In January, there was a marginal increase in tax revenues, and the expected revenue in February was not realised as tourism service providers paid their taxes on a "time-of-supply" basis at the previous lower TGST rates. MIRA has provided a mechanism to pay TGST and GST by invoicing in advance as soon as they receive bookings. Therefore, many businesses paid taxes in advance under this policy.
During January 2023, GST and TGST were paid for the month of December last year at the previous tax rates.
The government has increased the TGST from 12 percent to 16 percent and the GST from six percent to eight percent, starting in January 2023.
TGST and GST accounted for 70 percent of the tax collection last month.
Although tax revenue in February was lower than in January, the amount of taxes collected in February this year was higher compared to February last year. The increase was due to the increase in GST and TGST payables. Tax revenue stood at MVR 1.4 billion in February last year.