The Government of Maldives has issued a Medium-Term Revenue Strategy (MMTRS) to address the current economic and financial crisis.
According to the government, this strategy establishes a comprehensive approach for developing a vision for medium-term revenue strategies, including transparent revenue system reforms.
According to publications, by the end of 2023, government revenue increased to MVR 33,278.6 million, 2.4% higher than forecasted and 43.2% higher than pre-COVID-19 levels. Despite this growth, the implementation of new revenue measures remains a fiscal risk due to challenges in formulating and executing these strategies within a budget year.
“The MMTRS aims to introduce revenue measures for the medium term, ensuring synergy between revenue policy, administration, and the legal framework,” it stated.
Strategic outcomes include increasing the revenue-to-nominal GDP ratio from 32.5% in 2023 to at least 35.5% by 2028 to improve fiscal sustainability, public welfare, economic competitiveness, and climate resilience.
The strategy includes reforms for indirect taxes, such as broadening the GST base and formulating an excise tax regime, and for direct taxes, including improving the income tax system and introducing a presumptive tax regime.
Other measures include formulating an infrastructure fee, monetizing carbon credits, and limiting discretionary tax expenditures.
Legal reforms are outlined for both the short and medium term, covering legislative consultation processes, modernizing tax acts, and introducing new tax regimes.
The MMTRS aims to strengthen current revenue policies, enhance domestic revenue mobilization, and support extensive fiscal and development reforms, contributing to achieving Sustainable Development Goals (SDGs) and improving public perception of tax policies.
The Maldives’ economy has experienced robust growth driven by tourism, which has been significantly impacted by COVID-19. The MMTRS envisions enhancing fiscal sustainability by strengthening revenue policy formulation and implementation, increasing transparency, and fostering public confidence.
This strategy aims to maintain fiscal stability amid recent increases in capital expenditure and debt financing, providing a holistic and inclusive approach to revenue system reforms and reducing dependency on external resources.
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