New bill on land sales to close tax loophole

The government has proposed legal changes for privatising rehabilitation centres and controlling the price of land sales to prevent tax evasion.

According to the president’s office, the government submitted bills to the parliament yesterday to amend the 2011 Drug Act and the 2002 Land Act. The bills have not been made public yet.

The president’s office explained that under the existing land law, buyers and sellers could agree upon prices without any regulatory controls and evade the 15 percent tax on land sales.

The amendment is intended to close the loophole, the president’s office said, which was created after the High Court struck down a provision in regulations governing sale and ownership of land.

On September 30, the civil court had ruled that that the sale of Maafanu Lalpoolge, a 1,102 square feet home in Malé, for the sum of MVR1 was a valid transaction. The home was sold to to a local company called Eve Maldives Travels and Tours.

The market price for a 1,000 square feet plot of land in the congested capital is reportedly more than MVR6 million (US$389,105). As 15 percent of the purchase price must be paid as a tax, the government would collect MVR900,000 (US$58,365) from such a sale.

At the price of MVR1, however, the tax authority was paid 15 laari.

The Maldives Inland Revenue Authority had expressed concern with potential tax revenue lost as a result of the loophole.

The government also submitted a third bill to amend the 1998 law governing the lease of uninhabited islands. The president’s office said the amendments were proposed to put in place rules and legal procedures for leasing shallows and lagoons.

The amendments to the Drug Act were meanwhile proposed to authorise private parties to operate rehabilitation centres in accordance with criteria and rules set by the government, the president’s office said.

While the Drug Act mandates the establishment of various centres to provide rehabilitation services, the president’s office said additional changes were proposed to “pave the way to provide different services under one roof”.

Amendments were also proposed to introduce rules and procedures for sending drug addicts overseas for rehabilitation at the government’s expense.

A specialised Drug Court was formed under the 2011 law as part of a policy shift away from a punitive approach against small-scale drug offences. The court suspends jail sentences subject to the completion of a rehabilitation programme.

In April 2014, Mahaz Ali, chief judge of the drug court, expressed concern with the inadequate rehabilitation facilities available in the Maldives. The main community centre in Malé was at full capacity at the time and could not accept more patients, he said.

President Yameen announced plans to privatise rehabilitation centres in his address at the opening of parliament in March this year.

In July, the National Drug Agency opened a halfway house in Hulhumalé for recovering addicts.

According to a 2012 UN report, there are 7,496 drug addicts in the Maldives. However, critics say the real figure is much higher.