Amendment seeks to introduce prison term and harsher fines for nonpayment of tax

An amendment has been proposed to the Tax Administration Act to introduce a maximum prison sentence of three years for individuals who intentionally fail to submit tax filings for any taxes required under any law, with the aim of evading tax.

The government-backed bill sponsored by PNC’s Vilimale’ MP Mohamed Ismail is aimed at empowering Maldives Inland Revenue Authority (MIRA) to determine the amount of tax payable in cases where taxpayers fail to file returns and revise tax-related offenses and penalties as well as the powers vested in MIRA to recover outstanding tax payments.

In this regard, the bill states that it will be considered tax evasion if it is proven that a taxpayer deliberately included false information in a tax statement, omitted relevant details, or provided inaccurate financial data.

It will also be considered tax evasion if a taxpayer fails to submit tax returns as required by law and does not cooperate with the Commissioner General of Taxation on the matter.

Currently, the law stipulates a fine not greater than MVR 50 per day for each day a tax return is not filed. However, the proposed amendment sets a fixed fine of MVR 50 per day for each day the tax return remains unfiled.

At present, the penalty for failing to submit tax returns is home confinement for a period ranging from one to six months. However, the proposed amendment introduces significantly tougher punishments, replacing home confinement with a prison sentence of one to six months, along with a fine of up to MVR 250,000.

The current law imposes a fine of 0.05 percent per day of the outstanding tax amount for failing to pay taxes by the due date. The proposed amendment increases this penalty to 0.1 percent per day.

The amendment also simplifies the process of delivering notices for MIRA. Under the proposed changes, a notice will be considered delivered if it is sent to the taxpayer’s registered address with MIRA, emailed, sent via the online portal, or personally handed over by a MIRA staff member.