Government proposes key changes to tax legislation

25 JUL 2019

Government proposes key changes to tax legislation

The amendments proposed by the Attorney General will streamline the tax dispute resolution mechanism.

Attorney General has announced that the government will be submitting a bill to the parliament for amending law number 3/2010 (Tax Administration Act).  An online publication by the Attorney General’s office dated 24th July 2019 outlines a number of amendments to Tax Administration Act. As per the publication, the amendments are for the purpose of improving the tax administration system, adopting more transparent measures as to accountability, and affording businesses a number of offsets. Two of the amendments are directly aimed at counterbalancing the burden of tax on businesses in relation to compliance.

According to the publication, firstly, the amendments will stipulate a time limit within which the Maldives Inland Revenue Authority (MIRA) has to make a decision with respect to an objection filed under section 42 of the Tax Administration Act. The said section allows a party to file an objection relating to the outcome of an audit or investigation conducted by MIRA within 30 (thirty) days from the date of notice of such outcome issued by MIRA. Even though there is a deadline for filing an objection, currently the law does not explicitly specify a time limit for MIRA to respond. The absence of a time limit causes delays in determining the finality of tax obligations which in turn increases tax compliance costs of businesses.

Secondly, the proposed amendments will allow businesses to challenge MIRA’s audit findings without paying the disputed tax amount in full. At present, section 44 of the Tax Administration Act requires settlement of all and any tax payments owed to MIRA prior to filing an appeal with the Tax Appeal Tribunal. A number of cases have proven that this requirement is burdensome even for large businesses and hinders taxpayers from making an appeal. However, the proposed change allows to make an appeal after payment of just thirty-percent of the disputed amount, eliminating a major obstacle for businesses in resorting to avenue of appeal.

The amendments will bring about further changes to the current tax administration regime including the role and composition of the board of directors of MIRA. While a member representing the Ministry of Finance and Treasury will be included in the board, the amendments will also prescribe the length of term in office for the Commissioner General of Taxation and his deputy, and moreover, will limit the scope of application of tax rulings issued by MIRA.

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