Economic minister unable to explain reason for revenue dip

Economic Minister Mohamed Saeed told reporters on Tuesday that he does not know the reason for the decline in the state revenue this year – contributed mainly by a sharp drop in import duty.

The latest weekly fiscal report released by the Finance Ministry shows an 18.8 percent fall in state revenue as of February 6, compared to the same period last year. The biggest decline is in import duties, which fell from MVR 385 million to MVR 138 million – marking a 64 percent drop.

The sharp dip in import duties prompted questions as to whether the free trade agreement with China – which took effect at the start of this year - contributed to the decline. Saeed rejected the link when questioned about it last week, but did not provide a reason for the decline.

He was questioned again about the decline during a press conference on Tuesday afternoon.

Saeed told reporters that he does not know the exact reason for the decline, but reiterated his assertion that it has nothing to do with the FTA.

“I cannot make a comment until I go through the details. I cannot say why exactly. The narrative from the Parliament is that it was due to a decline in import of cigarettes or the sale of cigarettes. I am unable to say at this time that yes, that is the reason. I cannot know until I look at the statistics,” he said.

He said that detailed information regarding the changes from the doubling of import duty on cigarettes can be accessed through the Finance Ministry, Maldives Inland Revenue Authority (MIRA), and Maldives Customs Service.

While Saeed was unable to provide an explanation for the decline in revenue, he said that the current economic crisis is something the incumbent administration inherited due to poor decisions by its predecessor.

He also rejected the allegation that the country’s economic situation hasn’t improved, noting that the economy is projected to grow by 6.4 percent this year.

During a meeting of the Parliament’s Public Accounts Committee on Monday, Deputy Speaker Ahmed Nazim, a senior politician from the ruling People’s National Congress (PNC), said that he hasn’t seen any cut down in the state’s expenditure or an improvement in the country’s economic situation.

He also said tthat while the government has not explained the reason for the decline, the reason is clear from the statistics.

He said that cigarettes are the biggest source of revenue from import duty, and that there has been a slowdown in the import of the product since the hike in import duty on cigarettes took effect on November 1 last year, because businesses had stockpiled on the product beforehand.

On November 1, the Maldives increased the specific rate of import duty on cigarettes and beedi from MVR 3 to MVR 8, and the ad valorem tax on the products by 50 percent.

Tobacco importers and distributors raised the prices of cigarettes following this change, with the price of common cigarette brands rising between MVR 240 to MVR 290 per pack, and MVR 2,240 per carton.

While businesses initially reported a drop in the sale of cigarettes, there has been an increase in the sale of rolling tobacco as well as the smuggling of cigarettes.

On October 25 – just before the duty hike had been set to take effect – authorities raided The Hawks’ boatyard in K. Thilafushi and seized a shipment of 200 master cartons of Manchester brand cigarettes believed to have been smuggled into the country on one of the company’s ships.

And earlier this month, the police announced they had opened an investigation after 955 cases of tobacco products including cigarettes and pipe tobacco were illegally removed from two bonded warehouses, denying the state over MVR 67.9 million in duties.

In addition to raising the duty of cigarettes, the Maldives has also imposed a ban on vapes and e-cigarettes.