Cigarette duty hike cuts state revenue by MVR 574m in Jan
The ministry projects that total revenue for the year will surpass last year's figures due to improving economic conditions.
The Ministry of Finance has released the government's revenue and expenditure figures for January. As of January 30, the government had received MVR 3.2 billion in revenue, compared to MVR 3.7 billion during the same period last year, marking a decline of MVR 574 million.
According to the Ministry of Finance, one of the main factors contributing to the revenue decline was a reduction in import duty collection. Import duty revenue for January stood at MVR 128.7 million, which was MVR 158.5 million lower than the amount collected during the same period last year.
In response to written queries from Atoll Times regarding the decline, the ministry stated that the reduction in import duty revenue was largely due to the increase in cigarette duty in November. The Ministry of Finance cited the following factors:
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Traders imported and stored large quantities of cigarettes before the duty increase, resulting in a decline in cigarette imports over the past three months.
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The rise in cigarette prices led to a decrease in consumer demand, reducing the need for further imports.
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Import duty on tobacco products constitutes a significant portion of total import duty revenue.
The ministry also identified the February 2 deadline for key business tax payments, including corporate income tax, as another factor in the revenue decline. Tax revenue from these sources decreased by MVR 350 million in January compared to the same period last year.
Additionally, Goods and Services Tax (GST) revenue declined by MVR 84 million. The Finance Ministry attributed this to delays in GST payments by businesses.
Revenue from the recently increased airport taxes remained largely unchanged in January. The figures include:
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Airport development fee revenue increased by MVR 700,000.
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Airport service charge and departure tax revenue declined by MVR 100,000.
The Finance Ministry stated that the tax revenue from these sources had not yet been fully recorded in state accounts.
When asked whether the revenue decline was a concern, the ministry stated that despite the decrease in January, it expects revenue to increase over the rest of the year. The ministry projects that total revenue for the year will surpass last year's figures due to improving economic conditions. In particular, revenue from GST, airport taxes and fees, and income tax is expected to rise, driven by an increase in tourist arrivals compared to the previous year.
The Ministry of Finance estimates:
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Tax revenue will increase by MVR 3.0 billion this year.
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Non-tax revenue is expected to decline by MVR 126.4 million, primarily due to lower revenue from the sale of islands compared to last year.
However, the ministry cautioned that delays in the implementation of planned revenue-raising measures or changes in taxpayer behaviour could negatively impact projections. These include potential delays in spectrum charges and amendments to the GST Act, which may affect expected earnings.
