Ministry of Finance has stated that the bill to increase taxes will be proposed before the start of the next Parliament session.
The finance ministry plans to hike the Goods and Services Tax (GST) and Tourism Goods and Services Tax (TGST) to increase state revenue. The ministry stated that 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 GST will be increased from 6% to 8%.
Furthermore, the government is in discussions to wait six months for taxpayers to prepare for the changes. The finance ministry noted that the tax rate in the Maldives is lower than in other small developing countries. The ministry stated that the state revenue would only reach USD2 billion by 2025 if the policies are not changed immediately and that the government would be forced to propose a USD3 billion budget in 2023 if spending is not decreased. It stated that these amounts would be a financially unfeasible response to the changes in the global market and economy.
Additionally, the government will be implementing policy changes to increase state revenue in a way that does not interrupt essential public services. The government has so far spent USD60 million this year to decrease the cost of electricity and spent USD20 million to provide discounts for electricity and water supply services. The government plans to decrease spending by implementing subsidy reforms to decrease the reliance of state-owned companies on the state budget as well as halting plans to commence any new government projects.
The finance ministry highlighted that the Maldives is among the fastest-growing economies, despite the Gross Domestic Product (GDP) contracting by 33% in 2020. It stated the GDP is expected to grow by 13-16% this year, making the Maldives the second-fasting growing economy among Asian countries following the pandemic, thanks to the measures implemented by the government.