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IMF Country Report No. 22/187
MALDIVES
TECHNICAL ASSISTANCE REPORT––MODERNIZING THE GOODS AND SERVICES TAX
June 2022
This Technical Assistance Report paper on Maldives was prepared by a staff team of the International Monetary Fund. It is based on the information available at the time it was completed in March 2022.
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Title Page
FISCAL AFFAIRS DEPARTMENT
Maldives
Maria Coelho, Lee Burns, and Peter Mullins
Contents
ABBREVIATIONS AND ACRONYMS PREFACE EXECUTIVE SUMMARY I. INTRODUCTION II. TAX POLICY FRAMEWORK OF THE GOODS AND SERVICES TAX A. Revenue Productivity and Taxpayer Characteristics B. Dual Rate Structure and Ring-Fencing of Tourism C. Incidence and Rationalization of Exemptions and Zero-Rated Goods/Services D. Treatment of the Digital Economy E. Other Design and Implementation Issues III. LEGAL FRAMEWORK OF THE GOODS AND SERVICES TAX IV. REFERENCES FIGURES 1. Maldives and Comparators: VAT Revenue, 2007-2019 2. Maldives and Comparators: VAT C-Efficiency, Latest Available Year 3. Distribution of GST Payments Based on Turnover, 2019 4. Share of GDP Generated by Direct Travel and Tourism and Tourism Services as a Share of Exports, top Countries 2019 5. GST/VAT in Small Island Developing States 6. Maldives and Comparators: Internet Users in Total Population 7. Average Annual Change in E-Commerce Sales 8. Maldives and Comparators: Digitally Deliverable Services 9. Maldives: Relative Demand for Digital Media 10. Average Income from Airbnb Inc. by Country vs Indirect Tax Thresholds 11. Global Travel and Tourism Revenue by Sales Channel TABLE 1. Revenue Impact and Timeline of Main Policy Recommendations ANNEXES I. GST Treatment of Real Estate in Small Tourist-Dependent Countries II. Design Issues for B2C Taxation of Imported Services APPENDIX TABLE 1. Best Practices for VAT Treatment of Real Estate Transactions
Abbreviations and Acronyms
| B2B | Business-to-business |
| B2C | Business-to-consumer |
| BPT | Business Profit Tax |
| BPTA | Business Profit Tax Act |
| CD | Capacity Development |
| EBITDA | Earnings Before Interest, Taxes, Depreciation and Amortization |
| GAAR | General Anti-Avoidance Rule |
| GDP | Gross Domestic Product |
| GGST | General Goods and Services Tax |
| GST | Goods and Services Tax |
| GSTA | Goods and Services Tax Act |
| HIES | Household Income and Expenditure Survey |
| IMF | International Monetary Fund |
| LVIG | Low-Value Imported Goods |
| MIRA | Maldives Inland Revenue Authority |
| MOF | Ministry of Finance |
| OECD | Organization for Economic Cooperation and Development |
| OTA | Offshore Travel Agent |
| P2P | Peer-to-Peer |
| SAARC | South Asian Association for Regional Cooperation |
| SME | Small and Medium Enterprise |
| TAA | Tax Administration Act |
| TGST | Tourism Goods and Services Tax |
| TPU | Tax Policy Unit |
| VAT | Value-Added Tax |
Preface
In response to a request from the Maldivian Ministry of Finance on October 17, 2021, a remote technical assistance mission was conducted during January 6-24, 2022, comprehensively reviewing the existing Goods and Services Tax (GST) legislation and proposing concrete priority reforms to be included in a GST Act amendment. This mission of the International Monetary Fund's (IMF) Fiscal Affairs Department (FAD) comprised Ms. Maria Coelho (head), Mr. Lee Burns and Mr. Peter Mullins (both FAD external experts).
The mission had several rounds of productive discussions with the following officials and members of their staff: Minister of Finance Ibrahim Ameer and Mr. Ahmed Saruvash Adam (Ministry of Finance, MOF), Ms. Mariyam Juwairiya, Mr. Arshad Jameel, Ms. Aishath Hasna Ahmed, Mr. Mohamed Raaidh, and Ms. Nadheema Latheef (Tax Policy Unit -TPU - members and consultants). The mission also met with staff from the Maldives Inland Revenue Authority (MIRA), including Commissioner General Fathuhulla Jameel, Ms. Asma Shafeeu, Mr. Mohamed Ali Waheed, Ms. Aminath Zumra, Ms. Mariyam Jaidha, Mr. Ibrahim Rasheed, Mr. Ali Muaaz, Mr.
Hussain Amir, and Ms. Fathimath Amaanee Khalid. The mission met with multiple representatives from the Ministry of Economic Development, Ministry of Tourism, and USAID consultants to MOF. Finally, the mission also met private sector representatives including PwC Maldives, CTL Strategies, S&A Lawyers, the Maldives Association of the Tourism Industry, the Maldives Association of Travel Agents and Tour Operators, and the Maldives National Chamber of Commerce and Industry.
A half day workshop was provided to the authorities on international best practice for Value-Added Tax (VAT) coverage of the digital economy, with participants from MOF, MIRA and the Tax Appeal Tribunal.
The mission is grateful for the collaboration of the authorities and the efficient support provided in organizing and facilitating the discussions.
This report contains the mission’s findings, incorporating consultations with the authorities.
