Comment: IMF stabilisation program threatened if Majlis ignores tax bills

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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6 thoughts on “Comment: IMF stabilisation program threatened if Majlis ignores tax bills”

  1. Dr.Waheed and his wife's family with DRP agent Toppy (ex-drug addict/alcoholic) is secretly planning and trying to bring Anni down! Reporters and Political analysist, advisors please study the situation! Dr.Waheed met Dr.Hassan (wann be president) few weeks ago in secreacy in Raaje Chambers for one hour to confirm Yameen's plan of 5 steps!

  2. Maldivian Members of Parliament write to IMF: "We need some cash"...

  3. The humorous ubiquity of the phrase "I need some cash" withstanding, I feel the writer has made an important point about a pressing problem.

    A taxation regime is essential to ensure the equitable redistribution of wealth which does not flow downwards at all in a country with a history of bad employment practices, welfare spending which focuses on subsidizing running costs rather than strengthening public capital and misguided economic policies.

    Other crucial legislation would be those that strengthen the legal framework for the establishment and operation of, as well as lending by, banks in the Maldives. Capacity building within the judiciary is much needed as well in order to revitalize the banking sector which should be the preferable lender, not MPs/feudal lords or a government which faces blackmail at the hands of their debtors every 5 years.

  4. "I need some cash". Kutti earns MRF62,500 from Majlis alone. He runs a law firm, lectures at Maldives College of Higher Education as a "visiting professor", helps draft legal contracts / documents for every Tom, Dick and Harry, and most of the parties. He also runs many side businesses. His wife is a medical Doctor earning about RF35,000 per month. It seems the total of about RF300,000 to Rf500,000 per month this guy earns is not enough. What is he doing with all this money? Gang banging? drugs? If anyone knows, pelase respond.

  5. Very true Abdullah. You make some seriously valid points.

    As for the non-existence of information in the media which informs the public on matters relating to economics, the Maldivian media has yet to evolve, along with the mechanisms of governance, in this and many other fronts.

    When the simple concept of financial savings is relatively new to the people of this country, how can we possibly comprehend the idea of state accountability for the just and equitable provision of services to the people through taxation or any other means?

    We have not had a system of governance which attempted to provide economic empowerment to the people. We have not had a government which has considered the economic viability and sustainability of any public service provision, and 'feudalism' in the form of Gayyoomism and Gaasimism, heavily fuelled by nepotism and cronyism has been the long-standing norm.

    People have been 'trained' for a long time by so called political leaders to expect to live on hand-outs and favours. This practice continues and will continue for some time to come. Our cultural norm is 'hakuru dhengnaa bodubeybe'.

    It will not be possible to flip over long ingrained societal mindsets like this because the IMF requires this to be so, regardless of how hard-nosed they may be.

    There is a huge void between the few people at the top who take decisions with the IMF and the masses at the bottom, who are represented by the calibre of people in the Majlis.

    And it will take a long time to build the foundations of the just and fair society to which you refer.

    We have to weather this storm, and yes, the people of this country will suffer. Just as they have done for so long. Our children will continue to be malnourished and stunted; families will continue to struggle without access to adequate healthcare and despite supposed universal access to primary education, Maldivian children will continue to leave school with hardly a pass grade to speak of.

    And the longer we have irresponsible people in positions of power, the longer the status quo will prevail.


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