The International Monetary Fund (IMF) has supported the incumbent administration’s proposed idea of introducing income tax to the Maldives, as a mean to strengthen the country’s economic structure.
While addressing the local media, the head delegate of IMF, Mr Philipe Karam had stated that the new administration’s move to introduce the taxation system into a progressive one by introducing a personal income tax is favourable and beneficial for the country.
Mr Karam further stated that levying a personal income tax system will allow the state to identify the individual earnings of the country’s working-class citizens – which would, in turn, reduce the difference of wage gaps between the proletarians.
Furthermore, the head of the IMF delegate noted that the taxation system requires overhaul completely without specific amendments to certain taxations. In his explanation, Mr Karam noted that “simply fixing one segment of the taxation system, when direct and indirect taxation methods are involved, will not bring any favourable changes.”
Maldives incumbent president Ibrahim Mohamed Solih confirmed income tax will officially be levied in 2020.
The ruling Maldives Democratic Party has proposed a bill to the 19th People’s Majlis to introduce ‘personal income tax’ in the Maldives. The bill proposes levying an income tax of 3.5% for individuals earning between MVR60,000 to MVR100,000 and a 6.5% of income tax incurred to individuals earning between MVR100,000 to MVR150,000.
However, IMF emphasised that several challenges may present itself while introducing the new income tax system and the state must be a vigil in properly countering them. In addition to this, IMF further suggested the income tax system can best be utilized by introducing a full-fledged design to it.
“It is crucial to identify and set tax brackets while introducing an income tax system and also identify the average income category, tax collection itself should also be perfect,” Mr Karam noted.
IMF had praised the efforts by Maldives Ministry of Finance for introducing a specific tax policy unit to identify various approaches in introducing an income tax system as well as to assess any precedented challenges.