Income Tax Bill contrasts with Agenda 19; draws concern from MPs

MPs have expressed concern over the contrasts in the income tax bill presented to the Parliament and MDP’s pledges made to the people on the bill in its Agenda 19 manifesto.

The MPs expressed concern in today’s parliamentary session where the first hearing of the income tax bill presented on behalf of the government by Ungoofaaru MP Mohamed Waheed was carried out.

“No need for income tax, if dividend taxes are not collected.”

MP Mickail Naseem of South Galolhu expressed his dissatisfaction over the eight percent proposed tax on individuals earning more than MVR 40,000. MP Mickail declared that this was in stark contrast to what was pledged in Agenda 19.

“We pledged in Agenda 19 to take a tax of 3.5 percent from individuals earning MVR 60,000 and above.” reminded MP Mickail. He also stated that he did not believe exemptions needed to be made for dividend taxes as proposed in the bill.

“Dividend taxes are collected in the U.S.A and UK. Companies are separate legal entities. citizens are a separate legal entity as well. Just because companies pay BPT, exempting profits of their shareholders and individual operators of the company, is in my view, repealing social justice entirely. I don’t see the need for an income tax to be collected in the Maldives if dividend taxes are not collected.” criticized MP Mickail Naseem.

"Purpose is to reduce wealth disparity, not to profit state"

MP Mickail’s comments were echoed by MP for central Fuvahmulah Hussain Mohamed Didi who also expressed scrutiny over the proposed MVR 40,000 threshold for tax. MP Hussain also noted the MVR 60,000 threshold promised in the Agenda 19 and the 3.5 percent tax rate. The MP stated his desire to see this threshold reversed in accordance with Agenda 19 pledges during the committee phase of the bill before stating that dividend taxes should be collected to implement a full tax system.

“The main purpose of the bill is to stop unjust the accumulation of unjust wealth, not to profit the government,” said MP Hussain. Velidhoo MP Mohamed Abdulla Shafeeg also stated his disapproval of the MVR 40,000 threshold.

“Our desire is to see the cancellation of taxes on communication and transport. This will benefit the people immensely” said Shafeeg.

South Henveiru MP Hussain Shaheem (Andhun Hussain) also commented that he would support the bill with some necessary amendments such as raising the threshold to MVR 60,000. But MP Hussain firmly defended the decision to exempt taxes on dividends, putting him at odds with some others in the Parliament.

“Collecting taxes does not mean an impact that leads to businessmen of the country going bankrupt, selling their lands. That is why I strongly insist that collecting dividend taxes is not advisable at this time,” said MP Hussain.

He also called to lower the proposed 15 percent tax on individuals earning MVR 1.2 million per year.

Maldives a “tax haven” for those profiting from tourism?

MP Mohamed Waheed who presented the bill also spoke at the session today and commented that the purpose of the bill was to reduce the disparity between the rich and the poor in addition to increasing the state budget. He also reminded that this tax bill would hold businesses and individuals accountable and answerable and put a stop to financial crimes.

“Maldives is one of the few countries that does not levy a tax on the income of the individuals who gain dividends from their investments and have interests in the country. This allows businesses to reduce the amount of taxes to be paid from their profits,” said MP Waheed.

He also described the Maldives as a “tax haven” for those profiting from the tourism industry and noted that one of the biggest means of income into the country was not being properly utilized. The proposed tax rates in the country are also lower than in other countries, according to MP Waheed. High-income individuals in the Maldives have to pay 15 percent under this bill while in comparison, high-income individuals in Sri Lanka have to pay a tax rate of 24 percent.

Finance Ministry has set the target of collecting income taxes from next year onwards and estimates that the proposed tax rates in the bill would yield the government around MVR 600 million from 6000 individuals per year.