In response to concerns over tax evasion within tourism sector, the Maldives Inland Revenue Authority (MIRA) has unveiled a comprehensive Compliance Improvement Plan for 2025-2026. This initiative aims to address the underreporting of income by resorts and other industries, ensuring tax contributions align with economic growth.
Tourism Sector Under Scrutiny
Tourism remains the cornerstone of the Maldivian economy, yet MIRA has identified discrepancies between the industry’s expansion and its income tax contributions. Factors contributing to this gap include:
- Escalating operational expenses
- Overvaluation of fixed assets
- Profit shifting to offshore entities in low-tax jurisdictions
- Intentional strategies to minimize tax liabilities
To combat these issues, MIRA plans to:
- Identify and audit high-risk entities employing tax evasion tactics
- Propose legal amendments to deter fraudulent activities
- Develop and enforce specific policies for resorts concerning tax record-keeping and reporting
- Engage stakeholders through forums and symposiums to raise awareness about new policies
Broadening the Compliance Horizon
Beyond tourism, MIRA’s plan addresses other sectors exhibiting tax compliance challenges:
- Guesthouses and City Hotels: Despite increased occupancy rates, reported incomes have declined. Issues include overvalued assets, unreported additional services, frequent ownership changes, and inadequate record-keeping. MIRA intends to formulate a specialized policy to rectify these problems.
- Construction and Real Estate: Companies in this sector often deduct substantial interest amounts and misclassify capital expenditures as revenue expenses, leading to distorted income records. MIRA plans to develop industry-specific guidelines, educate taxpayers, and conduct audits to address non-compliance.
- Food Service Businesses: Rapid growth in cafes, restaurants, and hotels hasn’t translated into proportional tax revenue. MIRA will launch a campaign to monitor these businesses and perform audits to recover unpaid taxes.
- Transportation Sector: Despite an increase in operations, tax contributions remain low. MIRA aims to ensure accurate tax payments through targeted measures.
- Professional Services: Medical officers, lawyers, and accountants will see strengthened income tax enforcement to ensure accurate reporting.
Focusing on High-Net-Worth Individuals
Recognizing the need for accurate tax reporting among affluent individuals, MIRA plans to:
- Develop a framework to define and tax high-net-worth individuals
- Amend income tax laws and regulations accordingly
- Conduct targeted audits to ensure compliance
Enhancing Tax Registration and Timely Payments
MIRA’s policy also emphasizes:
- Identifying and registering unregistered entities
- Encouraging timely tax payments
- Prioritizing the increase of punctual taxpayers
By implementing these measures, MIRA aims to foster a culture of compliance, ensuring that all sectors contribute their fair share to the nation’s revenue.
