Government proposes import duty hike for oil, staple foodstuffs

The government has proposed raising import duties for staple foodstuffs and oil to 10 percent to raise additional revenue anticipated in the record MVR24.3 billion (US$1.5 billion) state budget for 2015.

Amendments (Dhivehi) submitted to the Export-Import Act on behalf of the government by Maldives Development Alliance MP Mohamed Ismail proposes raising import duties from the current zero rate to 10 percent for rice, flour, wheat, and sugar as well as oil or petroleum products.

Additionally, the bill proposes raising custom duties for tobacco from 150 to 200 percent and raising the duty for a single cigarette to MVR1.25.

The government has also proposed imposing a 20 percent custom duty for luxury cosmetics and perfume and a 200 percent custom duty for land vehicles such as cars, jeeps, and vans.

However, the bill proposes scrapping import duty for luxury yachts imported for tourism businesses.

The stated purpose of the amendment is revising import duty rates in light of “price changes in the global market”.

The latest monthly economic review from the Maldives Monetary Authority noted that “the International Monetary Fund (IMF) commodity price index fell in both monthly and annual terms in September 2014, by 4 percent and 9 percent, respectively.”

“The monthly and annual decline in commodity prices was attributed to the decline in petroleum, metal and food prices. The price of crude oil fell by 4 percent in monthly terms and by 12 percent in annual terms and stood at US$95.9 per barrel at the end of September 2014,” the review stated.

About 30 percent of the Maldives’ GDP is spent on importing fossil fuels. In 2012, US$ 486 million was spent on oil imports, and the figure is estimated to rise to US$700 million by 2020.

According to the Maldives Customs Service, of the MVR7.2 billion (US$466.9 million) worth of goods imported in the first quarter of 2014, one-third was spent on petroleum products.

Finance Minister Abdulla Jihad meanwhile told parliament’s budget review committee last week that the government was considering increasing custom duties “mostly for luxury items, or items that are harmful to the environment or health.”

Jihad had said the items under consideration were tobacco, perfume, and vehicles.

Other revenue raising measures

In his budget speech to parliament, Jihad also revealed plans to revise the electricity subsidy, which he said currently benefits the affluent more than the needy.

Targeting the electricity subsidy to low-income families or households would save 40 percent of the government’s expenditure on the subsidy, Jihad explained.

Jihad told the budget review committee that the government anticipates MVR533 million (US$34.5 million) in additional revenue from revising import duties, which was among five revenue raising measures proposed with next year’s budget.

The forecast for additional revenue from the new measures is MVR3.4 billion (US$220 million), including US$100 million expected as acquisition fees for investments in special economic zones and MVR400 million (US$25.9 million) from the sale and lease of state-owned land.

The other measures were introducing a green tax of US$6 per night in November 2015 and leasing 10 islands for new resort development.

An amendment (Dhivehi) to the Tourism Act has been submitted by Progressive Party of Maldives MP Abdulla Khaleel on behalf of the government for introducing the green tax.

The government has also decided to waive import duties for construction material and capital goods imported for resort development and provide sovereign guarantees for loans.

Meanwhile, at the ongoing budget debate, opposition Maldivian Democratic Party MPs have criticised plans to hike import duties while providing concessions to wealthy resort owners.

The burden of higher prices due to higher tariffs would be borne by the public, the MPs argued, contending that the government’s economic policies would benefit the rich at the expense of the poor.

“Our question is why shouldn’t an income tax be introduced? When MDP submitted an income tax bill to parliament it wasn’t passed. But we are telling this government to introduce an income tax and [tax] the affluent as well,” said MDP MP Eva Abdulla last week.

Related to this story

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Government submits revenue raising bills to parliament


Parliament approves import duty hikes

Parliament has approved amendments to the Import-Export Act to raise import duties on a range of goods as part of the current administration’s revenue raising measures.

The amendment bill submitted on behalf of the government by MP Mohamed Rafeeq Hassan was passed with 34 votes in favour and 19 against at yesterday’s sitting of the People’s Majlis.

Once the amendments (Dhivehi) are ratified by the president, a 15 percent tariff will be reintroduced for construction material, articles of apparel and clothing accessories, silk, wool, woven fabrics, cotton, man-made filaments, wadding, special yarns, twine, cordage, ropes, cables, carpets and other textile floor coverings, lace, tapestries, trimmings and embroidery.

Tariffs will also increased from the current zero percent to five percent for sugar confectioneries and diesel motor oil and raised from 10 to 15 percent for organic chemicals and compounds of precious metals, rare-earth metals, radioactive elements or isotopes.

Custom duties for vehicle seat covers will be raised from 35 percent to 75 percent.

While custom duties for organic and chemical fertilisers and pesticides as well as for live chickens, ducks, turkey, quail, and chicks will be eliminated, duties for polythene bags and items that contain hydrochlorofluorocarbons (HCFCs) will be hiked to 400 percent and 200 percent respectively.

The tariff hikes reverses changes brought to the law when import duties for most items were eliminated in late 2011 by the administration of former President Mohamed Nasheed ahead of the introduction of a Goods and Services Tax (GST).

Import duty was also eliminated for food items – with a few exceptions such as bananas, mangoes, watermelons, and papaya to protect the local agriculture industry – as well as for construction material, fabrics and garments, paper and books, environment friendly goods, paints, floor coverings, footwear, steel, medicine, medicinal machineries and products, fertilisers, electric vehicles, cosmetic goods and domestic appliances.

During yesterday’s final debate on the government-sponsored amendments, MPs of the opposition Maldivian Democratic Party severely criticised the indirect tax hikes, contending that the burden of increased prices of goods would be borne by ordinary citizens.

In a press statement yesterday, newly-appointed Maldives Monetary Authority Governor Dr Azeema Adam predicted a rise in the inflation rate as a result of hiking tariffs.

The central bank previously estimated the inflation rate to hold steady at four percent as global commodity prices were expected to decline this year.

The Maldives Customs Service meanwhile revealed last week that revenue in March increased by 12 percent compared to the same period in 2013 on the back of a 30 percent increase in imports.

“Total revenue collected in March 2014 was MVR 139.7 million, while it was MVR 124.8 million in March 2013,” MCS said in a statement.

“Importation of fuel (such as diesel, petrol and jet fuel) shared 36 percent of total imports in March, twice the value of food items imported during the same period. Third most imported category of goods in March was machinery and electronics which accounted for 15 percent of total imports in March.”

Exports, however, dropped by 65 percent last month compared to the same period last year, which was “linked to the 97 percent reduction in the volume of exports by the state-owned Kooddoo Fisheries Maldives Ltd, whose main export is Frozen Skipjack Tuna to Thailand.”

Customs also revealed that imports in the first quarter of 2014 amounted to MVR7.1 billion, which represented an 11 percent increase compared to the first quarter of 2013.


DQP MP submits resolution to cut fuel surcharge

The Dhivehi Qaumee Party (DQP) has submitted a resolution to parliament calling on the government to cut the fuel surcharge included in the electricity bill every month.

In the resolution, DQP MP Riyaz Rasheed claims that the fuel surcharge was “a type of tax unapproved by the parliament and taken from the citizens, despite the laws clearly stating that any tax could only be taken after parliament approves it.’’

“When President Mohamed Nasheed was campaigning for the presidential election, the pledge he made publicly was to lower the electricity tariff,” Riyaz Rasheed said in the resolution. “It could be believed that raising the electricity tariff from month to month is a deliberate attempt made by the government to make the citizens poor.”

In the resolution the MP says that electricity is one of the country’s basic needs and that due to the hike in electricity tariffs, “today citizens have to spend bulk of their wage on electricity.”

The resolution also says that the owners of medium-sized businesses were worried about the future of their businesses “because of the government’s decision to float the dollar exchange rate in to a band of Rf10.28 – Rf15.42 which has made the prices of goods increase.”

The MP also called on the government to cease withdrawing taxes from the citizens in the name of fees or charges “at a time when adults and children are forced to live in poverty.”

In May last year the main opposition Dhivehi Rayithunge Party (DRP) led protests outside State Electric Company (STELCO) complaining about increased electricity tariffs.