Opposition candidate Ibrahim Mohamed Solih ‘Ibu’ pledged Monday to introduce an income tax if the Maldivian Democratic Party-led coalition wins the September 23 presidential election.
A progressive income tax is necessary to bridge the gap between rich and poor and to complete the taxation system introduced by the MDP government, Ibu told the press.
“We will do this after proper study and consultation with all stakeholders. Income tax will be taken from the wealthy, those who earn a certain amount of income,” he said.
An income tax law would be passed under a coalition government, which would be an important step towards combating corruption and generating revenue to provide essential public services, he added.
The opposition coalition would have a parliamentary majority after September 23, he suggested. A dozen former ruling party lawmakers were deemed to have lost their seats in July last year after they defected to hand the opposition a clear majority.
Ibu also pledged to reform laws and regulations to hold the tax authority accountable and to close loopholes that allow misuse of its powers.
In a tweet following the announcement, former president Mohamed Nasheed called the income tax pledge “the most important to bring development to the Maldives” and congratulated “candidate number two“.
In November 2016, a proposal by MDP MP Eva Abdulla to include income tax among non-binding budget recommendations was approved with the votes of two ruling coalition lawmakers.
The former central bank governor told MPs at the time that the tax was necessary to reduce income inequality. But some opposition and ruling coalition lawmakers declared they would vote against such a bill, which the government said it had no plans to submit.
Income tax legislation was part of the economic reforms proposed by the MDP government in 2011. The opposition-majority parliament at the time approved the goods and services tax, business profit tax, and a new tourism tax, but scuttled the income tax bill.
President Abdulla Yameen, who was then an opposition lawmaker, voted against the GST bill.
According to the previous income tax bill, the tax would have to be paid by individuals whose total monthly income from their salary or other sources exceed MVR30,000 (US$1,900).
The tax rates were set at three percent for monthly incomes between MVR30,000 to MVR40,000; six percent for incomes between MVR60,000 and MVR100,000; nine percent for incomes between MVR100,000 and MVR150,000; and 15 percent for MVR150,000 and higher.
The third nationwide Household Income and Expenditure Survey published last month found that households in Malé earn MVR37,035 (US$2,400) a month compared to MVR18,358 (US$1,190) in the atolls.
With its legal requirement to file annual tax returns and disclose earnings, an income tax regime would be an essential tool to combat corruption and illicit enrichment, former attorney general Husnu Suood observed at the time.
