Maldives ranks 1st in 'easiest to pay taxes'

I just came across an article published in Dec 2006 by the World Bank and the accountancy firm PricewaterhouseCoopers LLP which has ranked the Maldives as the easiest country in which to pay taxes for businesses.

This study bases the claim on the average of the country rankings on total taxes, number of payments and time required to comply.

The Maldives is followed in the rankings by Ireland and then Oman, with many Latin American, African and Former Soviet countries coming last in the list of 175 states.

The study shows the Maldives requires only one tax payment, which takes zero hours to pay, and is only 9.3 percent of a business’s profit, as opposed to the Gambia, where it is 291 percent of profit.

It is certainly commendable for Maldives to have an easy system of paying taxes. It is good for business.

But is it a good system?

The World Bank's executive summary begins, "Taxes are essential to finance public services but there are good and bad ways to collect them."

There must also be more effective and less effective systems of taxation, in so far as paying for public services and reducing the level of poverty is concerned.

There is no personal income tax in Maldives. This means the current tax structure is discriminatory, favouring shareholders of corporations in several respects. These corporations can distribute dividends when they choose or re-invest the earning to grow the business.

The imbalance of wealth distribution has created an elite rich class, in a country that prides itself as a 100 percent Muslim nation.

It is the responsibility of the Islamic system, to create the conditions within the state, where equal opportunity is provided for the development of every individual.