Minister of Finance Ibrahim Ameer has said the proposed tax hikes will allow the state to receive USD63 million in Goods and Services Tax (GST) and USD137 million in Tourism Goods and Services Tax (TGST).
Speaking at the Parliament of the Maldives, Minister Ameer detailed the benefits of implementing the tax hikes and the challenges the country would face without it. He said the government is willing to take all measures necessary to protect the country from global economic downturns, highlighting the steps the government had taken to control the COVID-19 pandemic.
Furthermore, Minister Ameer noted the changes to interest rates due to the changes to the US and European economies, which have closed many opportunities to receive foreign financial assistance. He also said that the continuing development of the Maldives means more expenditure and that the country needs to find ways to increase its own revenue. He added that it is also the recommendation of the International Monetary Fund (IMF) and the World Bank.
Additionally, Minister Ameer said the most important step in increasing revenue is increasing the GST and TGST, which would allow the government to manage its recurrent expenditure. He also said steps need to be taken to reduce state expenditure. He said GST and TGST need to be increased to implement the proposed fiscal strategy, noting the IMF recommended the Maldives increase its TGST from 12% to 18%, which is typical of most countries. He, however, said the government proposed to increase the TGST to 16%.
Minister Ameer said the government aims to continue providing essential services to citizens, adding that they do not want to wait another five years to gain access to the services. He said the tax hikes will increase the state revenue by USD195 million.