Finance Ministry has stated that the changes to the Income Tax bill will not cause a significant difference in the revenue estimated for 2020.
Finance Ministry's Tax Policy Consultant Arshadh Jameel said while the changes to the income tax bill will lessen the expected revenue, a significant difference is not expected.
Arshad said 85% of the tax revenue will be coming from 60 individuals. The changes to the tax bracket does not exclude these 60 individuals, he explained.
"Even with changes to the tax bracket and the rate of tax, we will still receive tax from the larger percentage of tax payers. Therefore, revenue will likely not be affected much," said Arshad.
The Parliament on Wednesday approved to introduce Income Tax.
According to the original bill submitted by the government, income tax will be imposed on those earning over MVR 40,000 per month. The Finance Ministry prepared the budget for 2020 including the estimated revenue from income tax imposed on those earning above MVR 40,000. However, main ruling Maldivian Democratic Party (MDP)'s Agenda 19 manifesto proposed a tax threshold of MVR 60,000.
While the bill initially said income tax will be charged on the income earned that exceeds MVR 40,000, the committee reviewing the bill increased the tax brackets and decreased the tax rate imposed. However, the committee later approved to impose income tax on those earning above MVR 60,000 per month. While it was previously planned to impose a tax rate of 8% on the MVR 40,000 - 60,000 bracket, no tax will be imposed on those earning below MVR 60,000 in a month. Instead, a tax rate of 5.5% will be applied on those earning between MVR 60,000 - 100,000 as opposed to the 10% as previously proposed.
According to the original bill, if a person earns above MVR 100,000 a month, 15% must be paid as income tax. With the new changes to the bill, 8% will be imposed on those earning between MVR 100,000 - 150,000 and 12% on those earning between MVR 150,000 - 200,000.
Under the original bill, 5,866 people were eligible to pay income tax under the MVR 40,000 tax threshold. The number decreased to 3,245 with the increase in tax bracket.