Finance Minister Ibrahim Ameer has stated that the estimated revenue and budget for next year may be affected if changes are brought to the income tax threshold proposed in the income tax bill.
According to the bill submitted by the government, Income Tax will be imposed on those earning over MVR 40,000 per moth. While 8% will be charged as Income Tax on those earning between MVR 40,000-60,000 , 10% will be imposed on those earning between MVR 60,000 - 100,000. 15% will be charged on those earning over MVR 100,000. The national budget for 2020 has been designed around the revenue estimated to be generated through the imposition of income tax.
While the government has proposed to impose Income Tax on those earning over MVR 40,000, the tax threshold proposed by main-ruling Maldivian Democratic Party's 'Agenda 19' manifesto is MVR 60,000. While debating the bill, several MDP members expressed support to amend the threshold to MVR 60,000 as per their initial pledge.
At the meeting held Saturday night by the Budget Review Committee, several questions were aimed at the asked on the income tax bill. Answering the questions, Minister Ameer stated that the bill was put together after extensive discussion with International Monetary Fund (IMF) and the World Bank.
An yearly revenue of over MVR 680 million is expected through Income Tax, said the ministry. MVR 348 million is expected to be received as tax imposed on workers' incomes, the budget estimates.
Minister highlighted even though the expected revenue may be inaccurate, it will decrease significantly if the income tax threshold on the bill is increased. If the threshold is increased to MVR 60,000, the number of people who are qualified to pay the tax will decrease drastically, said the minister.
"If we increase the threshold to MVR 60,000, the expected revenue will decrease. Even if our estimate is inaccurate, increasing the threshold to MVR 60,000 will leave some part of the population out of the net, which will in turn decrease the revenue", said Ameer.
Minister revealed that the government intends to provide subsidies and incentives next year, and in the upcoming years by utilizing the revenue generated from income tax. This would pave way for a fair and more efficient system to provide subsidies, said the minister.
Minister said the population on which the income tax is imposed on is very small as it is. Noting that the tax percentage imposed on those earning between MVR 40,000 - 60,000 is small, the minister said he does not believe it would cause inconveniences or difficulties.
"For example, we have proposed to charge 6% as income tax on those earning between MVR 40,000 - 60,000. If an individual earns MVR 50,000 he will have to pay a tax on 10% of his income. This means the average tax rate is 1.8%. Therefore only 1.8% tax will be taken from a person who earns MVR 50,000," Minister Ameer explained.
Minister Ameer stated that the Parliament will ultimately decide what is best and that the government will enforce Parliament's decision on the matter.
Finance Minister Ibrahim Ameer
