Chamber of commerce vice president slams economic development minister

Vice President of the Maldives National Chamber of Commerce and Industry (MNCCI) Ismail Asif has severely criticised Economic Development Minister Mohamed Saeed, questioning his “sincerity” and “competence”.

Asif told the press on Thursday (August 7) that Saeed lacked “vision,” discriminated among local businesses, and had not been able to attract foreign investment.

The relationship between the ministry and the chamber of commerce has deteriorated during Saeed’s tenure, Asif reportedly claimed.

Saeed has not provided necessary information regarding a loan scheme for small and medium-sized enterprises (SMEs), Asif added.

He went on to accuse the minister of “corruption” in appointing businessmen of his choosing to business-related committees formed by the ministry.

Declaring the chamber of commerce’s backing for the government’s flagship special economic zone (SEZ) bill, Asif, however, questioned Saeed’s ability to implement the legislation when it is signed into law.

He added that Saeed had not consulted local businessmen before the bill was drafted and submitted to parliament.

However, Asif praised the government for proposing the SEZ bill early in its five-year term and expressed support for its provisions, arguing that it would expand the domestic economy and spur growth.

If income generated from the SEZs was evenly distributed among the populace, Asif said it would benefit the public and raise standards of living.

He also dismissed criticism that SEZs could be used for money laundering and criminal enterprises, suggesting that it was not directly linked to the establishment of such zones and advised control measures.

Parliament’s economic affairs committee is currently reviewing the SEZ legislation and has set itself a deadline of October 10 to complete the assessment and possibly make revisions.

However, MP Abdulla Khaleel – chair of the committee – told newspaper Haveeru today that he expects the review process to be completed this month, after which the bill would be sent to the People’s Majlis floor for a vote.

Parliament breaks for a one-month recess at the end of August.

As the bill was a high priority for the government, the Progressive Party of Maldives MP for Faafu Nilandhoo said the committee has decided to hold two meetings for every day when there is a parliament sitting.

He stressed that stakeholders would be consulted and technical expertise would be sought.


High Court denies request for injunction to halt GST implementation

The High Court today denied a request by the Maldives National Chamber of Commerce and Industry (MNCCI) to grant a temporary injunction to halt the enactment of the Goods and Services Tax (GST) Act pending a court ruling on the constitutionality of contested provisions in the legislation.

Presiding Judge Abdul Gani Mohamed noted that the MNCCI filed the case late afternoon on Thursday, September 29, and that the GST law was in effect when the court reopened after the weekend. Following a preliminary hearing, the case was registered at the High Court on October 5.

If the court were to rule against MNCCI after granting a temporary injunction, the judge continued, it would not be possible to charge GST for goods sold in the intervening period.

Moreover, as article 65 of the Act states that the Tourism Goods and Service Tax (T-GST) Act would be repealed and replaced by the GST Act, the state would have to stop collecting T-GST from the tourism industry if the High Court issued the injunction.

Judge Abdul Gani said the claimant was unable to establish that irreversible damage would be caused to businesses if the injunction was not granted.

A majority of the five-judge panel therefore decided that there were no legal grounds to issue a temporary injunction to halt the enactment of the GST Act. In addition to Judge Abdul Gani, the panel consisted of Chief Judge Ahmed Shareef, Judge Dr Ezmiralda Zahir, Judge Abdul Raoof Ibrahim and Judge Abbas Shareef.

Legal challenge

At the first hearing of the case last week, lawyer Ali Hussein representing the Chamber of Commerce argued that article 51 of the GST Act – dealing with registration at the Maldives Inland Revenue Authority (MIRA) within a one-month period from the commencement of the Act – conflicted with articles 17 (non-discrimination) and 20 (equality before the law) of the constitution.

Ali Hussein contended that setting a threshold for registration – taxable supplies of the business over the course of 12 months must exceed Rf1 million – conflicted with the constitutional provision on “equal protection and equal benefit of the law.”

As a result of the threshold, said Ali Hussein, smaller shops would not charge GST while larger stores would do so for the same items.

The MNCCI therefore requested the High Court to strike down article 51 of the GST Act on the grounds that it was unconstitutional.

Moreover, it was argued that the one-month registration period provided in article 64 was too short and inadequate for businesses to prepare.

The third and last point of contention involved regulations drafted by MIRA under the Act not exempting semi-mature coconuts from GST despite different types of coconut being exempted under the Act.

Addressing the legal points raised by the MNCCI, State Attorney Moosa Alim referred to the concept of vertical equity in tax collection, whereby taxes paid increase with income.

Alim noted that article 17(b) of the constitution states that, “Special assistance or protection to disadvantaged individuals or groups, or to groups requiring special social assistance, as provided in law shall not be deemed to be discrimination.”

The length of the period for registration or glitches in implementation were not sufficient grounds to abolish the law, he said.

On the contention that the introduction of GST on top of custom duties amounted to double taxation, the state attorney submitted a list of 112 countries that charge import duties or tariffs in addition to Value Added Taxes (VATs).

MIRA’s Director General of Tax Planning Aiman Ibrahim explained that double taxation technically referred to the imposition of two or more taxes on the same income, property or financial transaction.

Businesses that paid GST on commodities purchased from wholesale traders or importers would have that amount deducted from their tax returns, he added.

Ali Hussein however contended that both import duties and the GST would be passed down to customers, who would be paying two taxes for the same item.

Asked by the Chief Judge whether a small business not eligible for GST registration could sell a taxable item without charging the tax, Aiman Ibrahim from MIRA replied yes.

Speaking on behalf of the MNCCI, the organisation’s Treasurer Ahmed Adheeb insisted that the Maldivian economy could not be compared to large economies such as Singapore or New Zealand.

“I know of nowhere in the world where GST has been implemented within a month,” he said, arguing that the cost of implementing the tax, in terms of monitoring and auditing tax returns, was prohibitive and outweighed the benefits.

Moreover, said Adheeb, there was no audit law in the Maldives and “only three licensed auditors.”

“We foresee serious problems that will eventually reach court as a result of [GST implementation],” he said.

In response, Aiman said there was “no connection between GST and audit licensing” as businesses would not be required to file audited reports for GST returns. “[The tax return] will be a single page document and MIRA will do the auditing,” he said.

Adjourning today’s hearing, Judge Abdul Gani observed that the legal points raised by were “very technical” in nature and offered both sides an opportunity to make a presentation on the technical issues involved in the case at the next court date.


MIRA to conduct nationwide campaign to raise awareness on GST

The Maldives Inland Revenue Authority (MIRA) has decided to conduct a nationwide campaign to raise public awareness of the newly-introduced General Goods and Services Tax (G-GST).

Sun Online reported that 13 teams from MIRA would be visiting 20 atolls in the coming days to inform the public and help businesses register with the tax collection authority.

The Maldives National Chamber of Commerce and Industries (MNCCI) meanwhile filed a case at the High Court last week seeking a temporary injunction to halt the implementation of the GST Act. The group of businessmen argue that a number of provisions in the Act were unconstitutional.

However the High Court informed the appellants to correct errors in their case forms and re-submit it. The first hearing is likely to take place next week.

Read the MIRA FAQ on GST here.


Night market concludes

The annual night market organised by the Maldives National Chamber of Commerce and Industry (MNCCI) drew to a close last night.

Newspaper Haveeru reports that some stalls gave away commodities for free while others sold goods at much lower rates than market prices. The market was held at the the tsunami memorial area at the eastern end of Male’ with 450 tables and took place from July 10 to 22.

According to local businesses, each stall made between Rf8,000 (US$500) and Rf15,000 (US$970) a night with kitchen utensils among the most popular items ahead of the upcoming fasting month of Ramadan.