The government-proposed amendment bill to increase taxes in 2023 has been accepted by the Parliament of the Maldives for consideration with 32 votes in favour and eight votes against.
Parliamentarian Mohamed Shifau proposed the Bill on Amendment to the Goods and Services Tax Act on behalf of the government to increase the Goods and Services Tax (GST) and Tourism Goods and Services Tax (TGST) in an effort to increase state revenue.
The finance ministry stated the government decided to implement tax hikes in response to changes in the global market and in accordance with the current economic situation, which threatens to become worse if no measures are taken. As such, the government will be decreasing expenditure and implementing a variety of measures to increase state revenue, including increasing TGST from 12% to 16% and increasing GST from 6% to 8%. The changes are proposed to be implemented in January 2023.
The ministry stated the tax hikes will increase the yearly state revenue by USD194 million and will benefit the state and citizens. It noted that the Maldives, unlike other countries, is not being affected by high inflation because of the provision of subsidies, which is dependent on taxes. It also stated that USD16 million in fuel subsidies has been allocated in the state budget but the actual amount has reached USD65 million and is expected to reach USD129 million by the end of the year.
Furthermore, the ministry stated taxes on essential items will not be changed but the taxes on all other items will be raised. It detailed that a USD6.47 item costs USD6.86 due to taxes but that it would increase to USD6.99 after the tax hikes.