Don't hike TGST to meet expenses, central bank tells government
The Maldives Monetary Authority (MMA) said that the government must look at cutting costs rather than raising taxes to manage expenditure.
By
Ahmed Naaif
T-GST charged on services provided to tourists visiting the Maldives should not be revised every time the government needs funds to meet its expenses, central bank warned Thursday.
The Maldives Monetary Authority's (MMA) recommendations for the proposed 2023 budget have raised concerns over the government's proposal to hike GST and T-GST from next year. The MMA pointed out that:
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A study must be done before the hike comes into effect on the impact of raising T-GST on tourism before the hike
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At a time when the economy is slowing down and commodity prices are on the rise, the government must look at cutting costs rather than raising taxes to manage expenditure
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Higher taxes will push up inflation next year beyond the government's 2.2-point forecast due to market behaviours such as traders pushing up prices to boost business profits
"In particular, the authority recommends that the T-GST rate should not be changed to meet government expenditure," the MMA's recommendation read..
The government has submitted a proposal to the parliament to hike taxes from January:
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General Goods and Services Tax or GST - From 6% to 8%
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T-GST on tourism sector - From 12% to 16%
The changes have already been approved by a parliamentary committee of the whole house and is pending a vote in the floor.
Lawmakers supporting Speaker Mohamed Nasheed and members of the opposition PPM-PNC coalition have opposed the tax hike. They objected to it on the ground that raising taxes at this juncture without the government reducing expenditure and raising funds for the state would put an additional burden on the people.
Finance minister Ibrahim Ameer had said that taxes should be raised for the time being to meet the debt situation of the state due to loans taken to support the economy during the Covid-19 pandemic. If there is no tax hike at the moment, many infrastructure projects will have to be stalled and the state's finances will worsen, he had said.
The MMA, however, said that even though proposed budget had said that taxes were being hiked to reduce the budget deficit, that objective had not been achieved.
