Parliament passes prison terms and higher fines for tax offences

Parliament on Wednesday passed amendments to the Tax Administration Act introducing prison sentences for tax offences, increasing penalties for late tax payments and expanding the powers of the Maldives Inland Revenue Authority (MIRA).

The bill was passed with 47 MPs voting in favour and 12 against.

The government-sponsored legislation was introduced in August last year by Vilimalé MP Mohamed Ismail, Deputy Leader of the ruling People’s National Congress (PNC) Parliamentary Group.

The amendments revise offences and penalties under the Tax Administration Act and provide MIRA with further powers to recover unpaid taxes. The law will also allow MIRA to estimate and determine tax liabilities where a taxpayer fails to submit a tax return.

The Economic Affairs Committee reviewed the bill and made several changes before sending it to Parliament for a vote.

One amendment made during the committee stage concerns interference with officials carrying out functions under the authority of the Commissioner General of Taxation.

Obstructing such officials, using force against them, offering bribes, making written or verbal threats, exercising undue influence, or assisting in such acts will constitute an offence.

The offence will carry a fine of up to MVR 200,000.

An earlier version of the bill proposed a fine of MVR 200,000 or imprisonment or house arrest of between three and 36 months for the offence.

The legislation also changes penalties for tax evasion.

Submitting false declarations, withholding information and carrying out other acts intended to evade tax obligations will fall within the provisions governing tax evasion.

Under the existing law, the offence carries between three months and one year of house arrest.

The amended law replaces house arrest with imprisonment ranging from three months to two years, depending on the offence.

The amendments also revise provisions relating to the failure to submit tax returns and other information required by MIRA.

These include failing to submit tax returns and accompanying documents required under tax regulations, failing to provide information or documents required under tax or other laws, and failing to cooperate with a person or team designated by the Commissioner General of Taxation.

The civil penalty for failing to submit a tax return will remain at 0.5% of the tax payable for the relevant tax period.

However, the existing provision allowing a fine of up to MVR 50 for each day a return remains overdue will be changed to a fixed penalty of MVR 50 per day.

The criminal penalty for the specified non-compliance offences will be a fine of up to MVR 250,000 together with imprisonment of between one and six months. The existing law provides for between one and six months of house arrest.

Parliament also approved an increase in the penalty imposed for late payment of taxes.

The current daily penalty of 0.05% of the unpaid tax amount will increase to 0.1%.

At the new rate, an unpaid tax liability of MVR 100,000 would incur MVR 3,000 in penalties over 30 days, compared with MVR 1,500 under the existing rate.

The legislation also establishes an eight-year limitation period for initiating criminal proceedings over offences under the Tax Administration Act.

It further sets out how the existing two-year statutory period for pursuing civil enforcement action against taxpayers should be calculated.