IMF国际货币组织全球-Maldives_Technical-Assistance-Report_74页_1mb

Summary of the Technical Assistance Report: Reform Options to Strengthen Tax Policy in the Maldives

Core Content

This report, prepared by the International Monetary Fund (IMF) in March 2019, outlines reform options to strengthen the tax policy framework in the Maldives. It emphasizes the need for a more efficient, equitable, and revenue-generating tax system. The report highlights the importance of enhancing the role of the Ministry of Finance (MOF) in tax policy formulation and the need to modernize the current tax structure to align with international standards and improve tax administration.

Main Viewpoints

1. Strengthening the Tax Policy Process

• The current tax policy process is fragmented, with the Maldives Inland Revenue Authority (MIRA) preparing and implementing regulations and tax rulings that should ideally be the responsibility of the MOF.
• The TAA (Tax Administration Act) grants MIRA the power to issue tax rulings, but this is inconsistent with international best practices, where tax rulings are administrative and not policy-making.
• There is a need to reorganize responsibilities between the MOF and MIRA to ensure that tax policy matters are handled by the MOF, with MIRA providing technical input.

2. Implementing a Modern Income Tax Architecture

• A dual income tax system is recommended, comprising a moderately progressive tax on employment income and a uniform tax on capital income.
• The employment income tax scale should include a zero-tax bracket for lower income groups, with rates of 10% and 15% for higher brackets.
• Capital income should be taxed at a uniform rate of 10%, aligned with the first non-zero rate in the employment tax scale.
• A simplified presumptive tax regime at a rate of 3% or 4% should be introduced for small businesses below the GST threshold to reduce administrative and compliance costs.
• The BPT (Business Profit Tax) rate should be unified at 15% for all businesses, including banks and foreign income.

3. Protecting the Tax Base and Boosting Revenues

• Anti-tax avoidance measures should be adopted, and tax concessions should be repealed to protect the tax base.
• The GST should be gradually harmonized by removing zero-rating (except for exports) and increasing the standard rate to 6%.
• The existing GST threshold should be preserved.
• A recurrent property tax should be considered as a long-term option to broaden the tax base and improve revenue sustainability.

4. International Tax Aspects

• The Maldives should adopt transfer pricing legislation aligned with OECD guidelines.
• Interest deductions should be limited by including a statutory cap in the law.
• A uniform cross-border withholding tax of 10% should be imposed on dividends, interest, royalties, and management and technical fees.
• Tax treaties should be negotiated and updated to reflect recent international developments, including BEPS (Base Erosion and Profit Shifting) changes.
• All tax concessions under the SEZ (Special Economic Zone) Act should be repealed.

5. Tax Policy Unit (TPU) Establishment

• A TPU should be established within the MOF to guide tax policy reforms and perform economic and revenue impact analyses.
• The TPU should be integrated into the Fiscal Affairs Department and initially consist of a small core team (e.g., 4 staff members).
• The TPU should be empowered to initiate, participate in, and oversee the legal drafting of tax policies.
• The TPU should be given institutional arrangements to access relevant data regularly.

Key Information

Current Tax System Overview

• The tax-GDP ratio in the Maldives was about 19.3% in 2018, but the country faced a budget deficit of 4.8%.
• The main sources of tax revenue are:
  • GST (Goods and Services Tax) – 48% of total tax revenue
  • Business Profit Tax (BPT) – 18% of total tax revenue
  • Import duty – 19% of total tax revenue
  • Green tax (on tourists) – 5% of total tax revenue

Tax Reform Estimates

• The recommended PIT (Personal Income Tax) reform could raise total tax revenues by about 4%.
• The Gini coefficient (a measure of income inequality) is estimated to decrease from 0.59 to 0.58.
• Approximately 60% of the PIT revenue would be collected from the top income decile.

Tax Administration and Legal Framework

• The TAA gives MIRA the authority to issue tax rulings, which should be limited to administrative and procedural matters.
• Tax rulings on policy matters should be made by the MOF with technical input from MIRA.
• The MOF should be responsible for the formulation of tax policy, while MIRA is responsible for its implementation.
• A TPU is recommended to be established within the MOF to support tax policy development and analysis.

Recommendations

Conclusion

The report underscores the need for a comprehensive and modern tax policy framework in the Maldives. It recommends strengthening the MOF's role in tax policy formulation, establishing a TPU to support this process, and introducing a dual income tax system with a progressive scale for employment income and a uniform rate for capital income. Additionally, it calls for the modernization of the GST system, the protection of the tax base from erosion, and the alignment of international tax policies with global standards. These reforms are expected to enhance tax efficiency, equity, and revenue generation in the long term.