Comment: Income tax a necessary step to combat corruption

Husnu Suood is a former Attorney General and prominent lawyer in the Maldives. This op-ed first appeared in newspaper Haveeru on August 29, 2011. Translated and republished with the author’s permission.

Corruption has spread and taken root in the Maldives to extreme levels. Corruption allegations can be levelled everywhere. This evil disease has become common in state institutions, government offices, public companies as well as private companies and businesses. As a result of corruption allegations against persons filling high posts of state institutions, public confidence in these institutions are lost and instead of places with public respect it becomes the target of public ridicule.

The loss of public funds and opportunities for the public due to corruption is increasing daily. If Rf1,000,000 of public money is spent to purchase a generator instead of the Rf700,000 that should actually have been spent, the public ends up losing Rf300,000. If this Rf300,000 is not pocketed by employees, it could have been spent on other projects for the public. In this vein, we can only imagine the amount of money that is lost on a national level.

If an employee of a private business sells goods at a higher price and deposits the difference into his personal bank account, the business is going to go bankrupt instead of developing and prospering. While the shopkeeper who is employed with a salary Rf4,000-a-month builds two dhonis of his own, the owner of the shop goes bankrupt. If businesses do not lose money in this manner, national productivity is going to rise.

If a state employee spends in excess of his means, buys expensive items, changes his lifestyle and visits Europe for two-week holidays, he must have sources of income or the resources to prosper.

When the personal income tax comes into force, individuals would be legally compelled to file tax returns or financial statements once a year. The statement would clearly show sources of income as well as the level of income. If a person buys expensive items disproportionate to his income or spends in excess of what the financial statement shows is his actual income, the way will be open to determine whether or not he earned that money legitimately.

For example, if tax returns show that a person’s income for the past five years was Rf30,000 and he suddenly buys an expensive brand new BMW car, that would reveal that he has received illegitimate monetary gain. It would mean that he either falsified his true income to evade taxes or that he somehow received a large amount of money through illegal means.

Therefore, if an investigation is launched into such a case, the individual would have to bear responsibility for proving how he suddenly came about the assets or money. If he got the money through selling an ambergris he found, he would have to prove it. If the person got the money through legitimate means, he would not have to worry. If for instance he brought a plot of land legitimately, it would not too difficult to prove.

Drug trafficking and money laundering are two very serious issues currently facing the Maldives. A solution to these problems must be found without further delay. Finding solid evidence for conviction is a major problem faced by investigative authorities. We see a person who is unemployed buy expensive cars, land and property. Although people whisper in secret to each other of their wealth and prosperity, due to the lack of a legal framework to compel them to reveal their sources of income, they are able to stay hidden and benefit from illegal activities. When individuals are forced to file tax returns and details of their income and expenditure, the doors that are now open to commit crimes with impunity, beyond the reach of the law, will be closed.

Taking these matters into consideration, it is not just state revenue that will increase when the personal income tax legislation is passed into law. In addition, it will provide new facilities or means within the tax system to combat the plagues of corruption and drug trafficking. The taxation system will help to establish a strong, sound and fair state.

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15 thoughts on “Comment: Income tax a necessary step to combat corruption”

  1. Lawyers must stop bribing witnesses to lie in court if we need to combat corruption.

  2. The first sentence of this article gives the impression that corruption is quite a recent and new phenomenon. This is not so. Corruption thrived when Gayoom was president. It happened regularly under Nasir's watch as president. Big fish did not get caught. Small fish were caught and punished and blamed.
    People who had eyes could see.People talked about it quietly and privately; never publicly.
    Maldivians have long lived in a culture that actually encourages and rewards corruption. The culture itself must change, and that is not easy.
    In parliament, rich men, often in opposition benches, are vocal and vociferous against the introduction of income-tax.
    They are so much against income- tax because they know that what this article says is true. Who, in his right mind, would pass a death- sentence on himself?
    Maldives is a country run by the rich few, for the rich few.
    In a country where there has never been any income-tax ever, majority of the people do not even know what it is.

  3. personal income tax should come into force after import duty tax is abolished. Since Maldives depends on imported goods almost altogether, its a heavy taxation system. Personal income system will kill the middle class.

  4. I am amazed that a lawyer like Husnu Sood has no clue about income tax. I think the problem is that he has never paid any income tax anywhere he has lived and so do not know the ins and outs of the income tax.

    As per talking about a BMW car Sood is talking thru his backside.
    What about the savings people have? How many thousands could some people have saved? These are not taxable. Only the interest on the savings are taxable.
    Furthermore, the income someone may earn from outside of Maldives could not be taxed either as then it would be double jeopardy.
    No wonder Maldivian Government has messed with the resignation of Ministers etc under his advice.
    He is not fit to be even in charge of a bath tub let alone Attorney General if he spouts such nonsense about income tax.
    I have nothing against a good income tax regime but the way they are doing in Maldives is simply ridiculous and they have no idea about income tax.

  5. If corruption was rife when Maumoon ruled the country, it is rampant now.

    If corruption was concealed when Maumoon ruled the country, it is open now.

    If corruption was an act of shame when Maumoon ruled the country, it is clebrated now.

    Corruption prevails in every nook and corner you look at, in this government. And many are unhesitatingly continuing their acts of corruption without any fear because they know they have the support of the government.

    Corruption did not start recently, this has been the norm of this government from day one. The country has gone down the drains because of the amount of corruption that was brought on with this government.

    I am glad that MDP's MP, Colonel Nasheed and Husnu Suood are vocal about it.

  6. Dear Minivan News,

    The introduction of this article says that this article was first published on Haveeru and that it has been translated. It would be good to know who translated the article.

  7. A good reflection of our reality. Doesn't matter in who's government it started. The important thing it's out in the open now and people are addressing the issue more than ever. We first have to acknowledge that there is a problem before we can find a solution.

  8. Colonel Nasheed should be Quamee (petty) Party. Sorry MDP, you want like the idea but I see him as such an immature person.

  9. Enough !!!

    So ripping us off is the solution to corruption?

    GST is paid by wholesalers and then retailers...and at EVERY stage, it is passed back to the common person. Additionally, it is us who pay the custom duty too.

    Enough ! please ! I don't care who is in the Govt, but we can't manage our lives now...we are unable to feed good food to our children, and paying electricity / water bill assures a week-long migraine.

    Besides all these, I have a right to MY money; its my long hours of sweat. If a govt taxes...then they are using the law to be equal to pirates/robbers. Find alternative means of funding the govt :: if you cannot, then PLS STEP DOWN.

  10. I do not understand the meaning of word “corruption” I think it is the ways of fish blooded Maldivians!

    Where is the TEA MONEY please?

  11. Social Justice, the dignity of the oppressed, these cannot be realized only through taxation, but taxation is a PART of the process of realizing these goals. The reason I originally left my Church and became Muslim was because I was so moved by the way Islam was introduced to me as being so engaged in the pursuit of social justice and the fight against corruption in the world. I was surprised to discover what Islam was in Muslim nations, a tool used to repress the poor.

    I would like to see the religious scholars, the Adhalaath and others (Saeed, Dr. Shaheed all of them) come out and support the MDP's move against corruption and injustice, please remind me of why I became Muslim, I need to see Islam do what I had been taught it does. I need to see social justice realized in a 100 percent Muslim country, or else I cannot say Maldives is Muslim from what I had understood...

  12. Ben, you are having a laugh aren't you? I am a long time MDP supporter. Well since the founding days and they have brought down the dictator Gayoom but to say their fight against corruption? C'mon!.

    Who benefits most from most of the deals the government is making? MDP leadership. Look at Reeko Moosa now and there are many others like that.
    Look at the people they appoint into high and influential positions. It is the same. Unless they get benefits nothing still works in Maldives.

    Taxation in many countries is part of the revenue generated by Governments but Maldives earn enough revenues that without taxation we would be able to live comfortably if the Government manages the economy properly and get rid of corruption.
    Look at GMR at the Airport. Was theirs the best bid? Of course not! But they got it because of "other activities". It is of course not only MDP but almost all political parties operate this way.
    Do you know why the Government is not against the raising of the salaries of the MPs? This is because they then can raise the salaries of their own political appointees.

    Rozaina is also right. Trade and Economy depends a lot on speculation. When a Head of State says that his country is going to disappear in 6 years who in any right mind is going to invest in such a place?
    Many big investors are turned off by this statement that the President makes in foreign countries.
    MDP has done good things but talking sense is not among them.

    We do not need taxes at all. All we need is sensible spending for 2 to 3 years. During Gayoom's time, when Arif Hilmy became the Finance Minister, the budget was in a worse state than when MDP came to power. By the time he left the budget was balanced. So it is not that it cannot be done. It just requires the competent people and the will to do it and yes, we did not pay any tax either.

  13. Call it whatever you want. but the confiscation of legitimately earned property is theft. So taxation is theft.

    suppose, i gather a group of ppl and
    rob from 20% of what you have in the wallet. That is theft.
    And it is still theft if i give half of that to poor or other good causes. The good deeds that you do with stolen money does not make it non-theft.

  14. @Ben.When you make a judgement please don't hide real facts. Do you know the size of our parliament now and then and with democracy how many new highly paid institutions were created. Last years of Gayyoom government was a disaster in our economy. I don't see a way out without taxation and we need to consider the hidden tax we all have been paying previously.

  15. Taxation is not a bad thing per se.

    However we need to know the whole scheme and not just the political marketing line.

    While the government is shifting to taxation in order to generate state revenue, does it plan to decrease state enterprise? Can that be done?

    What will the government be doing to facilitate investment in the country. Apart from the tourism industry what other prospects for economic diversification do we have? Is the government capable of exploring the potential of the Maldivian economic environment? Is venture capital available? What are the state of our banks with regards to loan financing? Will the government be using tax receipts for debt repayment in order to free up cash flow at the banks?

    Is income tax really necessary at this stage? Can the tax be effectively implemented to generate enough revenue that will justify doing it?

    @Zeena: GST is an indirect (or hidden tax as you would like to call it) as well. Customs duties are pretty much the same.


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