The parliament’s budget committee on Thursday recommended introducing a personal income tax next year when it completed reviewing the MVR26.7 billion (US$1.7 billion) budget proposed for 2017.
A proposal by opposition MP Eva Abdulla to include the income tax among the budget recommendations was approved with the votes of two ruling coalition lawmakers. However, the government will not be legally obliged to implement any of the 10 recommendations, which also included managing cashflow to ensure the public will continue to social security benefits.
In a sign of growing support for an income tax within the ruling party, several pro-government lawmakers had called for the introduction an income tax during the budget debate that concluded Tuesday.
The calls from prominent MPs of the Progressive Party of Maldives came amid fierce criticism of plans to hike import duties and impose new taxes and fees next year.
The proposed revenue raising measures, such as a US$25 airport development charge and a “congestion tax” for vehicles in Malé will place a disproportionate burden on the poor, opposition MPs contended, lambasting the government’s unwillingness to tax the income of the wealthy.
On Monday, MP Dr Abdulla Khaleel, the secretary-general of President Abdulla Yameen’s faction of the divided ruling party, said the government should consider how to introduce an income tax in order to establish a “holistic tax system”.
An income tax would turn the longstanding fiscal deficit into a surplus, the chair of the economic affairs committee said, adding that studies should be carried out for implementation.
Dr Azeema Adam, governor of the Maldives Monetary Authority, meanwhile told the budget review committee Sunday night that an income tax will be necessary to reduce the gap between rich and poor.
However, it is too late to introduce the tax in 2017, she cautioned, advising longterm planning and preparing taxpayers.
During the budget debate the following day, PPM MPs Jameel Usman and Asma Rasheed agreed that plans should be made well in advance of introducing the tax.
“We should not look to always govern the nation with profits from the tourism industry,” said Usman while Rasheed urged the government to work towards introducing the tax next year.
But MP Riyaz Rasheed, the PPM parliamentary group’s deputy leader, said none of the 85 lawmakers in the People’s Majlis would vote in favour of an income tax bill.
“I won’t vote for it either. Let President Yameen or the government send a bill here even tomorrow for taking income tax. I will speak against it,” he said.
MP Gasim Ibrahim, a business magnate and leader of the Jumhooree Party, said he agreed on the importance of an income tax, but introducing one under the present circumstances would lead to foreign investors “immediately losing interest” in the Maldives.
Speaking after Gasim, PPM MP Ibrahim Shujau called on prominent businessmen to “surrender” in their opposition to an income tax.
“We want this government to take income tax next year,” he said.
A well-administered income tax imposed only on high earners would be preferable to “many ordinary taxes under different names,” said PPM MP Saudhulla Hilmy.
PPM MP Mohamed Ameeth said an income tax would “balance” the tax regime and “pave the way for investigating corruption” as taxpayers must show proof of earnings and income.
“If I pay taxes to [the Maldives Inland Revenue Authority] I have to declare how I earned my money,” he said.
PPM MP Muaz Mohamed Rasheed also expressed support for introducing an income tax as a measure to increase government revenue.
“I call on the government to go forward with plans to take income tax in the future,” he said.
MP Ali Mauroof from the PPM’s coalition partner Maldives Development Alliance called on the government to introduce an income tax “without delay” as it is done “everywhere in the whole world.”
MP Ahmed Amir from the MDA along with PPM MP Ahmed ‘Redwave’ Saleem had voted in favour of Eva’s proposal to add the income tax to the budget recommendations.
Both opposition and ruling parties lawmakers had also spoken in favour of introducing a progressive income tax during last year’s budget review process.
But former Finance Minister Abdulla Jihad said last December that the government does not have plans to introduce the tax as the tax base in the country is too small.
Very few Maldivians earn more than MVR100,000 a month, he observed, adding that both wealthy businessmen and sole proprietors pay goods and services and business profit taxes.
In 2011, the ousted Maldivian Democratic Party government had proposed legislation for introducing a progressive income tax for those earning above MVR30,000 (US$1,900) a month.
The opposition-majority parliament at the time approved the goods and services and business profit taxes, but opposed the introduction of an income tax.