Exports and Imports
The Marshall Islands primarily exports fish, coconuts, and handicrafts. In terms of imports, the country relies heavily on foodstuffs, manufactured goods, machinery, and fuels. In recent data, exports were valued at approximately $41 million, while imports totaled around $130 million, highlighting a trade deficit primarily financed through foreign aid and grants.
Infrastructure
Infrastructure in the Marshall Islands is limited and often vulnerable to natural disasters such as typhoons. The road network is relatively basic, with paved roads on major islands like Majuro and Kwajalein, but many outer islands lack paved roads and reliable transport links, impacting economic development and connectivity.
Balance of Trade
The Marshall Islands faces a significant trade deficit, with exports accounting for about 24% of GDP and imports around 75% of GDP. This imbalance underscores the country's reliance on external sources for goods and its vulnerability to fluctuations in global commodity prices and aid inflows.
Fiscal Policy
The Marshall Islands' fiscal policy is aimed at maintaining economic stability and promoting development through prudent spending and external aid management. Tax revenue as a percentage of GDP is relatively low, with the government relying heavily on grants and assistance from international partners to finance its budgetary needs.
Monetary Policy
The Marshall Islands, as part of the Compact of Free Association with the United States, uses the US dollar as its official currency. Monetary policy is therefore influenced by decisions of the US Federal Reserve, with limited scope for independent actions by the Marshall Islands' authorities.
Trade Agreements
As a small island nation, the Marshall Islands does not participate in major trade agreements like NAFTA. However, it benefits from the Compact of Free Association with the United States, which provides financial assistance and grants access to US markets for certain goods, bolstering its economy.
Environmental Regulations
Environmental regulations in the Marshall Islands focus on preserving marine resources and combating climate change impacts such as sea-level rise and coral bleaching. The government has implemented policies to protect its fragile ecosystem while balancing economic development, although enforcement and capacity remain ongoing challenges.
Tax System in Marshall Islands
Capital gains tax: The Marshall Islands does not levy capital gains taxes on profits from investments, making it an attractive destination for investors looking to capitalize on gains without additional taxation burdens.
Corporate tax rate: The corporate tax rate in the Marshall Islands is 3%. This low rate encourages the establishment of businesses and foreign investment, contributing to the country's economic growth strategy.
Sales tax: There is no sales tax or value-added tax (VAT) imposed on goods and services in the Marshall Islands. This policy helps keep consumer prices competitive and supports local purchasing power.
Property tax: The Marshall Islands does not impose property taxes on real estate. This policy is advantageous for property owners and investors, as it reduces the financial burden associated with property ownership.
Payroll tax: There is no specific payroll tax in the Marshall Islands. Employers and employees are not subject to payroll deductions for social security or similar contributions, simplifying labor costs for businesses operating in the country.
Tax deductions and credits: While specific tax deductions and credits are limited, the low corporate tax rate serves as a significant incentive for businesses. There are also provisions for tax-free zones and exemptions for certain activities, further encouraging investment and economic activity.
Tax compliance: Tax compliance in the Marshall Islands is managed through straightforward procedures, given the limited scope of taxes. The government focuses on ensuring transparency and efficiency in tax administration to maintain fiscal discipline and attract international business.
Tax burden: The tax burden in the Marshall Islands is among the lowest globally due to the absence of many typical taxes such as income tax, sales tax, and property tax. This light tax burden is intended to stimulate economic growth and attract foreign investment.
30 Jan 2024
28 Jan 2025
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