Tax Collections Rising in the Maldives

(taxationinfonews)Despite seeing tax collections rise significantly during the last month 12 months, the government of the Maldives is unlikely to see its budget deficit drop in the near future.

Late last week the Inland Revenue Authority of the Maldives released the Monthly Revenue Collection report for the month of May, showing that cumulative tax collections for the month reached MVR 389.6 million (USD 25.35 million) and were approximately 9.5 percent higher than throughout the same period in 2011.

During the month of May T-GST, a sales tax charged in the tourism sector, was the largest contributor to the total national tax collections, accounting for approximately 35.6 percent of total revenues. According to the report, collections of this tax are up by 119.1 percent compared to the same month last year.

The goods and service tax levied on products and services sold outside the tourism sector contributed MVR 83 million to the collections total, and accounted for nearly 21.3 percent of all taxes for the month. GST was first implemented in the Maldives on October 2nd 2011, and was intended to compensate government revenues for losses arising after the recent reduction in country’s import duties.

The total national tax collections for the 12 months ending May 2012 reached MVR 2.895 billion, and are reported to be 74.2 percent higher than for the 12 months ending May 2011.

Despite the growing revenues, the government of the Maldives does not expect to see its budget deficit shrink. Earlier this year the International Monetary Fund recommended that the Maldives should increase the rate of T-GST by 6 percent to 12 percent in order to raise the funds necessary to reduce the deficit, which is forecasted to reach MVR 9.1 billion.