Nasheed describes GST hike as ‘a great mistake’

The decision to raise the Goods and Services Tax (GST) is a great mistake by the government, and will not produce the outcome they except, states Parliament Speaker and MDP leader, former President Mohamed Nasheed.

In a press conference Sunday night after concluding his campaign tour of HA. Atoll and HDh. Atoll, Nasheed said that changing tax rates during an economic downturn is a great mistake.

“The purpose of all tax systems is to create greater trade opportunities and expand trade,” he said.

Nasheed believes the government’s move to raise tax rates to generate an additional MVR 2 billion in revenue is a mistake. He believes the government should instead cut unnecessary expenses and develop the economy to generate an additional MVR 2 billion.

“GST must be cut. And TGST must be cut as well. This is not good. This cannot be sustained,” he said.

Nasheed believes the previous GST and Income Tax rates were in a good range. He said that with the changes to GST and TGST rates, the government now needs to rethink the Business Profit Tax rate.

“Raising the GST will reduce business profit. Therefore, the revenue from Business profit Tax will decrease. The loss may be MVR 2 billion,” he said.

Nasheed said that now is not the right time to raise tax rates.

“We might not be able to generate the revenue we expect from GST. Playing with the tax rates during an economic downturn is a great mistake. This is wrong. This is not something people would do,” he said.

Nasheed had previously publicly endorsed the decision by the government to raise GST from six to eight percent.

In a trip to Addu in September last year, Nasheed said Maldives would have to service a huge portion of foreign debt in the next two years. He said the country had no option but to raise tax rates.

The shift in opinion comes amid heightened rivalry between Nasheed and President Ibrahim Mohamed Solih – who are competing against each other for MDP’s presidential ticket.

The rise in GST has increased the price of goods and services in the market. The government previously stated they planned on introducing direct subsidy to offset the impact.