The Ministry of Finance has stated the tax hikes will increase state revenue by USD194 million each year.
Speaking to PSM News about the government-proposed amendments to increase taxes, Chief Financial Budget Executive Ahmed Sharuvash said the proposed changes will benefit the state and citizens. He 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. He said 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, Sharuvash said taxes on essential items will not be changed but the taxes on all other items will be raised. He detailed that a USD6.47 item costs USD6.86 due to taxes but that it would increase to USD6.99 after the tax hikes.
The government submitted amendments 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.