The Tourism Ministry has condemned the Maldives Association of Tourism Industry (MATI) for “making statements to media outlets in a way that misleads the public about the government’s economic agenda”.
In a statement, the Ministry claimed that “MATI’s misleading statements in various media recently about the tax bills of the government’s economic reform agenda imply that the government’s efforts were undertaken without consulting officials from the tourism industry.”
The Ministry said it had “consulted a number of parties active in the tourism sector and sought advice for shaping the tax bills so that it would not be a disproportionate burden on the industry.”
“After these consultations, the Ministry is assured that businesses in the tourism industry support the reform agenda. Likewise, those in the front ranks of the tourism industry as well as MATI support it. Therefore, [the ministry] regrets an organisation like MATI making statements that are contrary to the advice and suggestions of senior industry leaders.”
Secretary General of MATI ‘Sim’ Mohamed Ibrabim was not responding at time of press.
The government has presented a raft of economic reform bills to parliament detailing several new taxes, including a business profit tax, general GST and income tax of those earning over Rf 30,000 (US$2000) a month. The government is also looking to increase its previously-passed tourism goods and services tax (TGST) of 3.5 percent to 6 percent, in exchange for lowering import duties, claiming that this will benefit businesses by allowing them to pay tax at the point of sale.
Secretary General of the Maldives Association of Travel Agents and Tour Operators (MATATO), Mohamed Maleeh Jamal, told Minivan News that his organisation had been consulted by the Maldives Inland Revenue Authority (MIRA) prior to the passage of the TGST, and was pleased to see some clauses implemented reflecting the input.
While no government body had sought to meet MATATO regarding the latest batch of bills, Jamal said parliament had forwarded them to MATATO for comment and input.
The Maldives pledged to the International Monetary Fund (IMF) earlier this year that it would pursue a package of policy reforms in exchange for a a three year economic programme to stabilise and strengthen the Maldives’ economy.
Under the new IMF program the Maldives has committed to:
- Raise import duties on pork, tobacco, alcohol and plastic products by August 2011 (requires Majlis approval);
- Introduce a general goods and services tax (GST) of 5 percent applicable to all sectors other than tourism, electricity, health and water (requires Majlis approval);
- Raise the Tourism Goods and Services Tax (TGST) from 3.5 percent to 6 percent from January 2012, and to 10 percent in January 2013 (requires Majlis approval);
- Pass an income tax bill in the Majlis by no later than January 2012;
- Ensure existing bed tax of US$8 dollars a night remains until end of 2013;
- Reduce import duties on certain products from January 2011;
- Freeze public sector wages and allowances until end of 2012;
- Lower capital spending by 5 percent
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IF open consultations had really been held and IF the reports written by highly paid foreign professional had been considered, then;
- GST on domestic transactions outside the tourism industry would not have been proposed for introduction at this stage.
- A suitable time-frame would have been allowed for implementation (even SAP integrated management software is allowed a year for implementation within a fair-sized enterprise).
- Greater consensus would have allowed for a smoother process.
I do not believe that the government had conducted consultations in an appropriate manner. Even now, except for political messages, the current administration do not seem to be so forthcoming about the details of tax implementation. Ad-hoc measures taken at the last minute might cause unnecessary hiccups to the economy. Also, there should be more talk about contraction of the public wage bill and public expenditure.
oh.. Minister Zulfa.. this is pillow talk if you were smarter..
This is a cop out. Surely as the 'author' says, this is pillow talk and should have been handled a lot better.
I have no issues with most of the taxes but the way it is being implemented raising a lot of concerns.
There should not be any GST on any food items and certainly not on Electricity, Health and Water. If they do this, then they would make an already bad situation worse. The World is in an economic crisis and raising tax in these circumstances is suicidal. Furthermore, there is no Interest Rate set by the MMA and Banks are charging 11 to 15 % Interest.
This is pure thuggery as in other countries the interest rates are around 4 to 5 % and in difficult times like this, the Central Bank would reduce the Interest Rates. These taxing of the people would not work with these extremely high interest rates.
Minister Zulfa condemns statement by General Secretary of MATI, who happens to be her husband. Now thats going to bring some tension to the bedroom!!
@manik: Are you having difficulty reading and assimilating what you read:
"Introduce a general goods and services tax (GST) of 5 percent applicable to all sectors other than tourism, electricity, health and water (requires Majlis approval)"
That clearly states that there will be no GST on electricity, health and water!
You can't compare other countries where interest rates are used as a policy tool by central banks; and by the way, the interest rate in most of the western world is near 0 at the moment. This is because these countries are facing huge public debt problems caused by the financial crisis of 2007/2008.
Once again, you cannot compare that to the situation in the Maldives. We have rampant inflation, over supply of Rufiyaa, a massive public sector wage bill and a number of other factors that are destabilising the economy.
Even though the financial crisis did have some impact on us, mainly through the tourism industry, that has largely disappeared. However, there's potential for a downturn due to the world economy tumbling into another recession.
The trouble we have is, the central bank is very weak and has almost no sway or power over the functioning or control of the economy. They can't even implement key policies that already exist, never mind any new ones.
On top of this, the State seems to be functioning like an octopus. The different arms of the State are talking and acting in multiple ways. The President's Office seem to declare "fatwas" every week, which are subsequently ignored by various other State bodies. If you contrast this to Gayyoom's regime, we had a similar situation. The differenc was that Gayyoom's "fatwas" had to be followed.
As long as the President's Office is obliged to release "fatwas" we would have a disfunctional State. The whole purpose of all these reforms of the past few years is to create a coherent and functioning State where responsible departments look after their respective functions and not for a single monolithic autocratic office like the President's Office releasing "fatwas" on everything!
“After these consultations, the Ministry is assured that businesses in the tourism industry support the reform agenda. Likewise, those in the front ranks of the tourism industry as well as MATI support it. Therefore, [the ministry] regrets an organisation like MATI making statements that are contrary to the advice and suggestions of senior industry leaders.”
Perhaps the Hon.Minister Dr. Zulfa should clarify to us (mere laymen) what she is try to say here. From the text what is see is a contradiction in her assertion.
As far as I am aware MATI consists of the very people whose support Dr. Zulfa claims the Government has for the policies against which MATI has been speaking out against!
I believe the business community (including the tourism industry) broadly supports taxation (GST, Profit Tax, income tax etc.)
Where the disagreement is in the "amounts" of these taxes and the period within which these taxes should be introduced to make them sustainable instead of introducing all at once. This can be done within a fairly short period of time.
Second, The Business Community has strong reservations about the Tax Administration Act as some of the clauses in this Law (if implemented as it is) would mean that the actual tax charged on companies will be almost 50% of their profit and not the 15% as the Public understands.