Main opposition Dhivehi Rayyithunge Party (DRP) Leader Ahmed Thasmeen Ali has sent a letter to the President requesting a six-month delay to the introduction of a 3.5 percent Goods and Services Tax (GST) approved by parliament last month.
In his letter, the minority leader noted that according to parliamentary rules of procedure, only the government could submit tax legislation. He urged the government to delay the implementation of the GST to allow businesses enough time to prepare. The General GST is due to come into force on October 2.
Thasmeen argued that a number of citizens could be subject to legal penalties specified in the legislation if they were not provided sufficient information about registering and paying the new direct tax.
In a booklet handed out to media last month titled “DRP’s response to the government’s economic nuisance package,” the party noted that the General GST would affect small businesses such as cornershops, cafes and teashops.
The businesses would “need a lot of preparation” to maintain accounts, install “modern computer systems and hire accountants” as well as provide customer’s statements showing the GST percentage.
Morever, taxing “total value of business transactions” would not be possible with GST at zero percent for some items.
Considering the potential “administrative confusion” and the country’s heavy reliance on imports, the DRP argued that levying a customs duty at the entry point to the country was more effective.
President’s Press Secretary Mohamed Zuhair told Minivan News today that the government viewed the DRP as the main opposition party and “gives a high priority to their concerns.”
“But the President has been advised by financial experts that all taxes should be part of one network and it is not sensible to omit one tax for the whole system to work,” he said.
Zuhair noted that “people wanted to delay the introduction of political parties” in the past, adding that “we have lost 30 years without a tax system.”
In May, the International Monetary Fund (IMF) approved a three-year support programme after the government agreed to “a package of policy reforms that will help stabilise and strengthen the Maldives’ economy.”
Under the IMF programme, the government committed to:
- Raise import duties on pork, tobacco, alcohol and plastic products by August 2011 (requires Majlis approval);
- Introduce a general goods and services tax (GST) of 5 percent applicable to all sectors other than tourism, electricity, health and water (requires Majlis approval);
- Raise the Tourism Goods and Services Tax (TGST) from 3.5 percent to 6 percent from January 2012, and to 10 percent in January 2013 (requires Majlis approval);
- Pass an income tax bill in the Majlis by no later than January 2012;
- Ensure existing bed tax of US$8 dollars a night remains until end of 2013;
- Reduce import duties on certain products from January 2011;
- Freeze public sector wages and allowances until end of 2012;
- Lower capital spending by 5 percent