Maldives: Technical Assistance Report—Reform Options to Strengthen Tax Policy

IMF Staff Country Reports, July 1, 2019

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Maldives: Technical Assistance Report—Reform Options to Strengthen Tax Policy

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Bibliographic details

• Published: July 1, 2019
• Series: IMF Staff Country Reports
• DOI: https://doi.org/10.5089/9781498323239.002

Key findings

• The report reviews tax policy in the Maldives and identifies reform options to support efficiency, equity, and revenue.
• The absence of a broad-based personal income tax (PIT) generates revenue leakages and significantly diminishes the role of tax policy in income redistribution.
• A modern tax design requires a holistic view of the taxation of different sources of income and different legal forms of taxpayers to maintain tax neutrality, to the extent possible, while preserving some degrees of progressivity, simplicity, and administrability.
• Updating the tax system to cope with recent international developments is vital to safeguard revenues.
• Strengthening the goods and services tax (GST) can raise revenues in the short- to medium-term.
• A property tax is an important option for the long-term.
• The report includes a diagram that demonstrates reform priorities to modernize tax policy in the Maldives.

Analysis and policy implications

• Revenue and redistribution:
  • Absence of a broad-based PIT leads to revenue leakages and reduces the effectiveness of tax policy for income redistribution.
• Tax design principles:
  • Holistic taxation across income sources and legal forms is required to preserve tax neutrality where possible.
  • Design must balance progressivity, simplicity, and administrability.
• International context:
  • Recent international developments require updates to the tax system to protect the revenue base.
• Short-, medium-, and long-term policy sequencing:
  • Short- to medium-term: strengthen GST to raise revenues.
  • Long-term: consider introducing a property tax as a durable revenue source.

Reform priorities (as identified in the report)

• Introduce measures to address revenue leakages caused by the absence of a broad-based PIT.
• Adopt a holistic tax design that aligns taxation across income sources and taxpayer legal forms.
• Preserve and balance progressivity, simplicity, and administrability in tax policy choices.
• Update tax rules and administration to respond to recent international developments affecting revenue.
• Prioritize GST strengthening for near-term revenue gains.
• Evaluate and plan for a property tax as a long-term revenue and policy instrument.

International Monetary Fund. Maldives: Technical Assistance Report-Reform Options to Strengthen Tax Policy, July 1, 2019.

Content in this bundle

• IMF TA Mission Report — Maldives
  • IMF TA Mission Report — Maldives (Markdown version)
  • IMF TA Mission Report — Maldives (PDF)