World Bank has said the Maldives need to raise more revenues to finance its large spending needs as it could still face challenges in meeting debt obligations in the near time.

World Bank in its Maldives Performance Expenditure Review (PER), stated that the Maldives could increase GDP by increasing Goods and Services Tax (GST). Some of the short-term options suggested by World Bank include:

  • Reducing the Personal Income Tax threshold
  • Introducing a presumptive tax regime at a rate of 2-3% of turnover for businesses below GST threshold
  • Rationalising GST exemptions and zero-ratings
  • Abstaining from introducing new tax incentives
  • Extending GST to digital services and offshore booking accounts

The World Bank PER stated that these measures could increase GDP by 2.7% in the short term, and a further 2-3% by raising GST and TGST in the medium term. The PER further stated that the GDP targets can only be achieved through transparent efforts and accountability on why taxes are being raised and what the revenue will be used for.

World Bank PER stated that the Maldivian government needs to keep compliance costs low to ensure it does not face challenges in debt obligations. World Bank predicts Maldives deficit and debt will only fall if revenues increase by an additional USD 149 million annually on average.

World Bank PER also stated that Maldives needs to improve the management of debt, guarantees and fiscal risks, especially from state-owned enterprises.