Ziyad says legislation alone can't prevent corruption

Maldivian Democratic Party (MDP) MP for Vaikaradhoo, Hussain Ziyad, has questioned the government's motives in introducing a bill to increase withholding tax on non-resident contractors, arguing that legislation alone cannot prevent corruption without accountability and proper implementation.

Ziyad made the remarks during Monday's debate in the People's Majlis on a government-sponsored amendment to the Income Tax Act.

The bill, submitted by Mathiveri MP Hassan Zareer, proposes increasing the withholding tax rate on non-resident contractors from 5 per cent to 10 per cent and making the rate the final tax liability for those entities.

While expressing support for the principle of taxing foreign contractors, Ziyad said major tax reforms should be subject to consultation and detailed review before being implemented.

He argued that insufficient consultation could result in unintended consequences for local businesses.

Ziyad also raised concerns about the combined impact of recent tax proposals. In addition to the withholding tax amendment, the government has submitted legislation seeking to impose Goods and Services Tax (GST) on goods and services supplied to the tourism sector by foreign vendors.

According to Ziyad, there is a risk that foreign service providers could pass the additional tax burden on to guesthouse operators and other businesses in the tourism sector.

During the debate, Ziyad claimed that foreign companies already avoid paying the existing 5 per cent withholding tax by establishing locally registered entities in the Maldives.

He said this practice allows such businesses to fall outside the scope of the non-resident contractor withholding tax regime.

Ziyad further questioned whether the proposed amendment would achieve its stated objective of supporting local contractors.

Referring to a government-backed development project in Noonu Atoll, he asked why foreign investors had been granted concessions if strengthening local businesses was the administration's priority.

He argued that the government's actions did not align with its stated policy objectives.

Addressing broader concerns about governance and public finance, Ziyad said corruption could not be addressed solely through legislative amendments.

“If a President is inclined toward corruption, no amount of legislation we enact will stop the theft of national assets. It flows from the top down. Unless the President himself decides against extracting these funds, this will not stop,” Ziyad told parliament.

He also alleged that leadership changes within state-owned enterprises were linked to political and financial interests.

Ziyad said parliament should carefully assess the proposed legislation and consider existing loopholes that may already allow businesses to avoid withholding tax obligations.

He further criticised the pace at which the bill was introduced and scheduled for debate.

“This bill is far too significant to be dropped in at 3:00 AM and pushed through,” he said.

Ziyad suggested that the intensity of the debate reflected competing interests surrounding the proposed changes and called for greater scrutiny of the legislation before it proceeds through parliament.

The bill has been referred for further consideration as parliament continues its review of the government's latest tax reform measures.