Cabinet approves legal reforms to increase govt's dollar earnings

The cabinet on Sunday has decided to reform the relevant laws and regulations that would enforce an increase in US dollar revenue to the government.

Following the Bank of Maldives’ (BML) highly contentious decision of suspending foreign transactions on debit cards, and the subsequent reversal of this decision, the cabinet held a press conference detailing the current economic conditions.

At the press briefing, Attorney General Ahmed Usham said the cabinet has decided on reforming the relevant laws and regulations to facilitate a payment mechanism from corporations to the state in US dollars, if the corporations earned its revenue in dollars.

While detailing this, Usham said that though some companies generated revenue in US dollars, they have continued to pay taxes and fees to the state in Maldivian Rufiyaa.

“However, the cabinet, on Sunday has decided to reform the necessary Acts and regulations that would ensure that the companies that earn in US dollars are enforced to pay its taxes and fees to the state in dollars,” Usham said.

The Attorney General added that some companies continued to pay pensions in Maldivian Rufiyaa even though they provided salaries in US dollars, which, Usham said, required amendments to the Pension Act, to ensure companies that pay salaries in US dollars are mandated to pay pensions in the same currency as well.

“We will be convening with Maldives Monetary Authority (MMA) and Maldives Inland Revenue Authority (MIRA) for discussions to make these changes at the earliest possible date,” Usham said.

The cabinet further approved for legal reforms to ensure importers will be required to pay import duties in US dollars.

“These steps are necessary to restrict black market currency exchanges from these companies that earn in dollars but pay their taxes to the government in Rufiyaa. The cabinet on Sunday made three key decisions to ensure these practices stop effectively,” the Attorney General noted.

The Attorney General’s Office is expected to draft and propose the necessary statutory amendments in the next two weeks, while it will implement changes to the regulations within a week.

While the Maldives government has taken extra measures to repay its mounting debt, the country faces a significant US dollar constraint, which in turn resulted in inflated exchange rates.

The Bank of Maldives (BML) on Sunday morning announced it was suspending foreign transactions from existing and new debit cards and new credit cards linked to MVR accounts, and placed a foreign transaction limitation of USD 100 on existing Standard and Gold credit cards.

The bank in its statement said the decision was owed to the increased card usage compared to the US dollar purchase of BML.

The decision however, attracted widespread public backlash, especially from Maldivian students in overseas universities.

BML reverted its decision on Sunday afternoon, citing it was based on the MMA’s instructions.