Govt proposes stricter penalties for tax offences

The government has submitted a bill to amend the Administrative Taxation Act, proposing stricter penalties for tax-related offences, including imprisonment and increased fines.

The amendment was introduced on behalf of the government by Villimale MP Mohamed Ismail, who serves as the Deputy Leader of the PNC Parliamentary Group.

Under the current law, tax-related offences do not carry prison sentences. The proposed changes aim to clarify existing offences, introduce new offences, and revise the penalties applicable to such acts.

According to Article 64 of the Act, evasion of tax is considered an offence. The amendment expands the definition to include submitting false statements, failing to provide required information, and other forms of tax fraud. While the current punishment is house arrest for a period of three months to one year, the amendment proposes a sentence of imprisonment ranging from three months to two years, depending on the severity of the offence.

The amendment also expands on offences related to failure to submit tax returns or information. It specifies three particular acts:

The civil penalty for failing to file a tax return remains a fine of 0.5% of the tax due during the relevant period. The existing provision of a fine of MVR 50 per day for each day of non-compliance is retained.

The proposed criminal penalty for these offences is a fine not exceeding MVR 250,000 and imprisonment for a term between one and six months. The current law provides for house arrest during the same period.

The bill also proposes an increase in penalties for failing to pay taxes on the due date. The daily fine for outstanding payments would be increased from 0.05% to 0.1% of the amount due. For instance, a business owing MVR 100,000 in taxes for one month would face a fine of MVR 3,000 under the new rate, compared to MVR 1,500 under the current rate.