The World Bank has stated that tax hikes are a meaningful step to increase revenue.
In a tweet, Country Director for the Maldives Faris H. Hadad-Zervos said the World Bank’s analysis shows that the fiscal position of the government of the Maldives and balance of payments has deteriorated due to rising global commodity prices, adding that urgent tax hikes are a meaningful step to increase revenue. He made the statement at a time when the Parliament of the Maldives passed the government-proposed amendment bill to increase the tax rates from January 2023.
The government proposed to increase Tourism Goods and Services Tax (TGST) from 12% to 16% and increase the Goods and Services Tax (GST) from 6% to 8%. The government expects to generate USD63 million from GST and USD136 million from TGST by next year. Therefore, the tax changes are expected to generate total revenue of USD195 million.
Ministry of Finance has stated that difficulties will increase in the future if steps are not taken to improve the financial situation of the state. Therefore, the ministry decided to take measures to increase revenue and reduce government expenditure, strengthen government-owned companies and reduce their dependence on the state budget. The government has also included cost reductions in its current projects.