President Mohamed Nasheed has pledged further economic reforms including the planned implementation of a general business profit tax in July and the possible increase of the Tourism Goods and Services Tax (GST) from six percent to 3.5 percent.
Speaking yesterday during his weekly radio address, the president claimed that serious reorganisation of state finances was needed as the Maldives graduates from the UN’s list of nations with Least Developed Country status.
This reorganization strategy includes a managed float of the rufiyaa to effectively devalue the currency against the US dollar . The move was designed to try and allow the local currency to be traded within 20 percent of the pegged rate of Rf12.85 – a decision that has led to ongoing protests in Male’, said by organisers to be focused on escalating living costs.
“Reducing public expenditure and increasing state revenue to reduce budget deficit; stopping money printing to prevent devaluation of currency due to increased supply; and corporatising government services to increase participation of efficient private parties,” were outlined by the president as the government’s key aims for the economy.
In order to meet these goals, Nasheed claimed that the government would look to begin collecting business profit tax from the private sector on July 18 as well as trying to impose a minimum wage for local people.
In addition, the president also claimed that he was considering increasing the Tourism Goods and Services Tax, which was first implemented as of January 1 this year, to six percent from the introductory rate of 3.5 percent.
Criticising national spending policies under former President Maumoon Abdul Gayoom, Nasheed claimed that his government had reduced a budget deficit that stood at about 30 percent of the nation’s GDP back in 2008 to just above 10 percent at present.
While generally supporting initiatives to reduce costs that have led to ongoing public protests in the country, the Treasurer of The Maldives National Chamber of Commerce and Industry (MNCCI), Ahmed Adheeb Abdul Gafoor, said that the the planned addition of a minimum wage and a Goods and Services Tax (GST) on all enterprises operating in the country needed to be gradually implemented.
Speaking earlier this month, Abdul Gafoor claimed that gradual introduction of taxes would be vital to ensure the nation’s fledgling economy can cope with any potential changes.