Saeed denounces talk of increasing tax rates while global inflation surged

People's National Congress (PNC) vice president and former Economic Minister Mohamed Saeed has denounced the government’s continued talks of increasing Goods and Services Tax (GST) and Tourism Goods and Services Tax (TGST) at a time of global economic recession and inflation.

The tax bill proposed by the government attempts to raise GST and TGST rates from 6 percent and 12 percent to 8 percent and 16 percent, respectively, effective January 2023.

Saeed, also the MP for Maavashu constituency, tweeted that while Eurozone has declared an impending recession at their doorstep, questioning whether the government really expected more tourists at a much higher tourism tax rates than ever before. He said that while the entire globe was hit hard by a wave of inflation, it was unbelievable that the government expected higher consumer spending.

Many parliamentary members have taken issue with the tax rate bill proposed to the parliament. The ruling party, MDP, issued a three-line whip to approve the tax rate bill amidst the internal conflict.MDP Parliamentary Group Leader Mohamed Aslam asserted that members who vote against the tax rate bill and defy the three-line whip will be subject to necessary ramifications.

According to a report published by IMF on September 16, 2022, on the subject of refining GST in the Maldives, increasing the GST rate at a time where the cost of goods and services are climbing higher and higher on the global market cannot be beneficial.

The government’s decision to raise tax rates comes after the International Monetary Fund (IMF) had advised against increasing tax rates before 2024, only after the state of the current inflation rate sorts itself out.

Even advocates of the tourism industry have expressed their concerns with respect to the government's plans to increase GST and TGST rates.