The Finance Ministry has raised fears that state revenue might fall below estimates due to a spike in unpaid resort rent and Goods and Services Tax (GST).
As GST and resort rent accounts for a majority of revenue, the ministry warned that further challenges could be faced in covering expenditure.
According to the budget proposed by the Finance Ministry for next year, compliance with tax laws and regulations declined in the wake of relief provided by the Maldives Inland Revenue Authority (MIRA) amid the Covid-19 pandemic.
At the behest of the government, MIRA at the time deferred some taxes and resort land rent and suspended enforcement action over non-payment.
Despite MIRA resuming enforcement action, the payment of taxes and other fees have not improved, the Finance Ministry noted.
The principal amount (excluding fines) of unpaid taxes increased significantly from June last year to June this year, the ministry said, noting that the government might have to take on more debt to plug the deficit if income is not collected at projected levels.
"If compliance by taxpayers with tax laws and regulations continues to decline, the chances of earning the estimated income during the year would be lower, and the extent to which expenditure needs to be financed is likely to increase," the budget book stated.
Statistics from the budget book shows that a total of MVR 7.7 billion was owed to the state by June, which was 28 percent or MVR 1.7 billion higher than last year.
Half of the amount is unpaid resort land rent.
Dues as of June:
- Income tax - MVR 536.8 million (106 percent rise)
- Tourism GST - MVR 972.9 million (71 percent rise)
- General GST - MVR 1.6 billion (48 percent rise)
- Other taxes - MVR 920 million (3 percent rise)
- Resort land rent - MVR 3.4 billion (17 percent rise)
- Non-tax income - MVR 171 million (16 percent rise)
- Total - MVR 7.7 billion (28 percent rise)
In order to reduce risks posed by the unpaid taxes, the Finance Ministry said the measures taken by MIRA should be reviewed after assessing their effectiveness.
The Finance Ministry said amending the tax administration law was underway as part of efforts to resolve difficulties faced at present in collecting taxes.
