According to the Maldives Monetary Authority’s Quarterly Economic Bulletin for Q3 2024, business profit tax (BPT) has become the leading contributor to government revenue, overtaking long-dominant sources such as general goods and services tax (G-GST) and tourism goods and services tax (T-GST). In Q1 2024, BPT revenue rose by MVR 879.3 million, primarily due to an increase of MVR 551.4 million in other business and property taxes and MVR 266.3 million in direct BPT contributions.
This shift highlights the growing reliance on corporate and property tax mechanisms, reflecting a diversification of revenue streams beyond traditional consumption-based taxes. Overall, tax revenue increased to MVR 8.5 billion in Q1 2024, accounting for 83% of total government revenue, despite a simultaneous decline in non-tax revenue. GST categories, while still significant, recorded smaller increments, with T-GST rising by MVR 251.7 million and G-GST by MVR 214.1 million during the same period.
The rise of BPT as a leading revenue source marks a critical evolution in the Maldives’ fiscal framework. However, it also raises questions about long-term sustainability. The reliance on BPT revenue makes government finances more sensitive to fluctuations in corporate profits, which could be affected by economic volatility, changes in tourism flows, or global financial conditions.
This development also calls for careful fiscal management to ensure balance across revenue streams. While the government has benefited from increased tax revenues in the short term, the concurrent decline in non-tax revenue, particularly lease extension fees and cross-subsidy earnings, reflects vulnerabilities that could challenge fiscal stability.
As the Maldives continues to navigate its post-pandemic recovery, leveraging robust tax policies while addressing weaknesses in non-tax revenue streams will be essential for maintaining fiscal health. Whether this shift towards greater reliance on corporate taxation signals a new chapter of fiscal resilience or a potential over dependence remains to be seen.
