The Maldives could see an additional USD 120 million (MVR 1.8 billion) added to its tax revenue if companies earning in foreign currency are required to pay taxes in US dollars, according to the Commissioner General of Taxation, Hassan Zareer.
In a recent move to enhance tax collection, the Maldives Inland Revenue Authority (MIRA) amended its income tax regulations in September, mandating that businesses earning foreign currency must file their tax returns under the Income Tax Act in US dollars and also settle their taxes in dollars.
Speaking with local media outlet Mihaaru, Zareer outlined that this adjustment is expected to boost income tax revenue to USD 80 million annually. When combined with the existing corporate income tax, total revenue could rise to USD 120 million.
“We are currently receiving USD 950 million annually, and this year we anticipate reaching USD 1 billion,” Zareer said.
Last year, MIRA collected MVR 21 billion in total tax revenue, of which USD 950 million was received in foreign currency. Tax revenue in US dollars saw a six percent rise last year, driven by increases in the Tourism Goods and Services Tax (TGST) and airport development fees. The TGST rise followed the adjustment of the tourism GST rate to 16 percent.
As of August 2024, tax revenue stood at MVR 17 billion, with over MVR 8 billion of this collected in US dollars, totalling USD 574 million.
The change in tax rules is expected to further strengthen the country’s dollar reserves while ensuring better alignment between foreign currency earnings and tax payments. This will not only simplify tax administration but also help mitigate risks related to currency fluctuations.
As the Maldives works to meet its projected USD 1 billion in tax revenue this year, these changes in tax regulations could play a crucial role in securing financial stability and enhancing revenue collection from sectors that predominantly earn in foreign currency, such as tourism and trade.
