The current majority of members in the Maldives Majlis have been cynically irresponsible in their handling of financial legislation.
Though they have found the energy to pass detailed amendments to the Finance Act which threatens to create administrative chaos and undermine the constitutional powers of the executive, they have ignored two tax bills – the Tourism Goods and Services Tax, and the Business Profits Tax.
These two bills are a vital part of the IMF program that stabilises the economy and keeps the country from bankruptcy.
The tax bills have been buried in the ‘Whole of Majlis’ committee for around a year, and it is obvious the members are not interested in passing them.
The sensational phone recordings released this week featured Majlis member Mohamed ‘Kutti’ Nasheed reading out a plan to ‘fast process’ the Financial Act Amendments bill and no-confidence motions, and “cease all work on the tax bills submitted by the government to the Majlis”.
It is unlikely the IMF and international banking groups will tolerate this situation for much longer without a downgrading of the country’s credit rating, especially now the tax bills’ delay has become associated with high levels of corruption in the Majlis.
The IMF is not a benign charity. It is a hard-nosed organisation quite capable of taking action against countries that take its money and fail to keep their promises and obligations.
Unless a better taxation system is established in the Maldives, international bankers may pull the loan plug, and the public sector and lower income groups in the population will both experience job losses and extreme financial hardship.
The blame for this potential economic disaster will rest squarely on the Majlis members who the people elected in 2009.
The latest IMF report for Maldives criticises the high public sector wage bill that is “very high by international standards”, and the low tax rate for its tourism sector, which the IMF says “remains well below international standards”.
Maldives’ hotel tax rate is one of the world’s lowest, well behind India, Sri Lanka, Philippines, Indonesia, and other comparable tourist destinations such as Dominica, Fiji, Barbados, Mauritius, Costa Rica, Vanuatu, Bahamas, Seychelles, Tahiti, and Jamaica.
Most of the profits from the tourism sector go to wealthy men and families who are often members of the Majlis and/or owners of media companies. The dreaded word ‘tax’ is rarely heard in the political discussion programs that dominate Maldives’ radio and television. Print and internet website news organisations also avoid the subject of tax. Serious informative articles on economics and business are impossible to find.
Significant government tax revenues will undermine the present system of patronage and corruption that permeates Maldivian society. People’s loyalties would shift away from wealthy men towards the government, which will be able to provide pensions, subsidies, adequate salaries and health care. These are the foundations of a just and fair society.
The Majlis majority who are refusing to pass tax legislation are acting against the best interests of the people and threatening the independence and national security of the country.
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