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Finance minister Ibrahim Ameer. (Photo/President's Office)

Tax hike 'need of the hour'; else dire economic fallout: Minister

Ameer said the government has already given enough time to businesses to raise taxes

26 October 2022

Finance minister Ibrahim Ameer said on Wednesday that the need of the hour is to increase taxes and that if it is not done now the Maldives will also face serious financial problems like the rest of the world.

Replying to questions from members of the parliament's committee of the whole house which is studying the government's proposal to increase GST from 6% to 8% and TGST from 12% to 16% from next year, Ameer said that increasing taxes at this time is the most important thing that needs to be done. If we do not do it right now, what will happen next will be very big, he added.

Minister noted: 

  • Taxes need to be levied to improve the state of public finance

  • Public finance situation worsened due to Covid-19 related spending to keep the businesses and economy afloat

  • This can only be corrected if the state generates more revenue

  • At the moment, the state's ability to tap into foreign financial markets is almost closed

  • The reason is that raising interest rates by countries to control inflation has increased the borrowing costs

  • There is no other option but to increase the domestic revenue

"Businesses will be better when public finance is in good shape. That's why we have to do it. This is what we all need to do to save ourselves together," Ameer said.

He said Britain's recent decision to cut taxes had hit the country's financial markets hard. The minister also said that the country will face serious economic problems if taxes are not hiked without being able to generate more revenue.

"In all foreign countries, they are increasing taxes to fund state services. We have to learn from other countries as well," Ameer said.

'Adequate time given'

The minister said:

  • The government has already given enough time to businesses to raise taxes

  • Since June, discussions have been held properly with businesses

  • Businesses have had enough time to prepare

"We have already given adequate time," he said, adding that raising taxes with the consent of businesses would not be possible.

The minister said that the development of guesthouse industry is not hindered because of the tax hike. However, the lack of proper infrastructure development is the biggest challenge, he said.

He said the government was developing facilities like transport services, harbours and airports by levying taxes. The government is also carrying out water and sewerage works which are important for the development of guesthouses, he said.

"These things are financed through taxes. Therefore, these barriers to guesthouses can be removed by levying taxes. So it will be better in the future," Ameer said.

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