Falah urges opposition to back tax hike on foreign contractors

Parliamentary Group Leader of the ruling People's National Congress (PNC), Ibrahim Falah, has called on opposition lawmakers to support a government proposal to increase withholding tax on non-resident contractors, arguing that the measure would increase state revenue and create more opportunities for local businesses.

The remarks were made during Monday's sitting of the People's Majlis as members debated an amendment to the Income Tax Act submitted by the government.

The bill, introduced by Mathiveri MP Hassan Zareer, seeks to increase the withholding tax rate on non-resident contractors from 5 per cent to 10 per cent and establish the rate as the final tax liability for those entities.

The proposal would not alter existing employee withholding tax rates, which apply to monthly income exceeding MVR 60,000 and range from 5.5 per cent to 15 per cent. It would also retain withholding tax provisions currently applied to payments made to non-resident entities.

During the debate, members of the opposition Maldivian Democratic Party (MDP) criticised the speed at which recent tax-related legislation has been introduced and advanced through parliament.

Several opposition MPs said they supported the principle of taxing foreign entities but argued that lawmakers had not been given sufficient time to review the proposed amendments before debate.

They also contended that significant tax policy changes should be subject to consultation with affected stakeholders before being sent to committee.

Some opposition members further expressed concern that higher withholding tax rates could have indirect effects on local businesses involved in construction and development projects.

Responding to the criticism, Falah urged MPs to read the bill carefully before opposing it.

He argued that the proposed amendment would benefit local contractors and increase government revenue.

“Read these bills clearly after dawn prayers. This is not a bill you can debate against. There are amendments that can be contested politically, but what we have submitted here will bring benefit to local Maldivian contractors, state finances and national wealth,” Falah said.

Falah stated that under the current system, some foreign contractors are able to recover part of the withholding tax paid through mechanisms available under existing regulations.

According to him, this has created a situation in which local companies bear a greater tax burden than foreign contractors undertaking similar work.

He said the amendment would address that issue and help ensure that foreign contractors pay the full amount of tax due in the Maldives.

Falah also argued that the change could increase opportunities for Maldivian companies by reducing disparities between local and foreign firms competing for projects.

Addressing opposition members directly, he said opposing the measure would amount to opposing revenue intended for the state and opportunities for local businesses.

“It would be better if you do not stand against this. Standing against this will only expose you before the Maldivian public. You are opposing funds meant to enter the Maldivian state and work meant for Maldivian companies,” Falah said.

The bill has been referred for further parliamentary consideration.