President Ibrahim Mohamed Solih has today ratified the sixth amendment bill to the Goods and Services Tax Act (Law Number 10/2011). Parliament passed the bill at its 39th sitting of the third session, held on Wednesday, November 16, 2022.
This paves the way for the tax hike in the country as the Government seeks to steady a wobbling economy.
The President's Office said that the amendment seeks to increase state revenue, following fiscal strategy forecasts that indicate the requirement for measures to accommodate recurring expenditures amidst volatile changes to the global economy.
The amendment raises the Goods and Services Tax (GST) rate from 6 to 8 percent and the Tourism Goods and Services Tax (T-GST) rate from 12 to 16 percent.
The change will take effect on January 1, 2023. Following ratification, the law was published in the Government Gazette.
While the Government is pushing for the tax hike in a desperate bid to cover its own losses and ballooning debts, its plans to increase the taxes have been backed by its international financial partners. Especially the World Bank.
World Bank Country Director for the Maldives, Sri Lanka, and Nepal said in a tweet earlier that World Bank analysis shows that the Maldivian government's fiscal position and balance of payments have deteriorated due to rising global commodity prices.
He added that urgent tax hikes are a meaningful step to increase revenue.