Government moves to slash oil tariff

The parliament has approved government-sponsored legislation for reducing the import duty for petroleum products from 10 to five percent.

In an expedited process at Monday’s sitting, the amendments proposed by Majority Leader Ahmed Nihan to the import-export law were debated and sent to a committee of the full house, which promptly tasked the economic affairs committee with completing a review and sending the bill back to the floor by next Monday.

Presenting the bill, Nihan said the government’s aim is to reduce the cost of living by making electricity, petrol and diesel cheaper.

“If there is anyone who should support this tax cut wholeheartedly, it is the opposition members in the parliament. I do not see any reason that this will not pass,” he said.

Higher electricity charges were reportedly identified by lawmakers as a reason behind the ruling coalition’s heavy losses in the May 6 local council elections.

Electricity bills for households in the Greater Malé region increased by more than 20 percent in March last year after the government revised tariff rates and discontinued subsidies. In the rest of the country, bills increased by up to 45 percent on some islands.

Cutting electricity subsidies for businesses in 2015 also sparked protests on several islands after bills at shops and restaurants doubled and even tripled in some cases.

The state-owned utility companies, State Electricity Company and Fenaka Corporation, levies 38 laari per unit as a fuel surcharge if the price of diesel exceeds MVR8 (US$0.5) per litre.

About 30 percent of the Maldives’ GDP is spent on importing fossil fuels. More than MVR3.5 billion (US$227 million) worth of fuel was imported in 2016, according to customs statistics.

Opposition lawmakers meanwhile called on the government to entirely scrap the tariff on oil during today’s debate. The import duty for oil was raised from zero to 10 percent in December 2014 as a revenue raising measure.

“It was this government that proposed this tax. It was zero duty for fuel during all previous governments, now that the election is 12 or so months away, this cut is proposed. I call on the government to get rid of this altogether if you’re sincere,” said MP Abdul Gafoor Moosa from the main opposition Maldivian Democratic Party.

MP Hussain Mohamed of the opposition Jumhooree Party contended that the charging customs duty on top of goods and services tax amounted to double taxation and contributes to the rising cost of living.

“I think this is a good time to talk about double taxing too. Charging GST and import duties should be stopped if we want to make things easier for the people,” he said.

MP Abdul Raheem Abdulla, deputy leader of the ruling Progressive Party of Maldives, meanwhile insisted that the government does not impose or reduce taxes for political reasons.

“There are very few resources for generating an income in the country. The government has to work with these resources to increase income. This government will not inflate or deflate prices for political reasons,” he said.