Prominent businessmen and magnates of the tourism industry endorsed the government’s economic reform agenda and introduction of direct taxation last night.
Speaking at a launching ceremony for the “Fiscal and Economic Reform Programme,” Mohamed Umar Manik, chairman of the Maldives Association of the Tourism Industry (MATI), observed that a sustainable source of government revenue was necessary for providing public goods and services.
“Today we have democracy in our country, but democracy can only be strengthened if we are able to deliver,” said the Chairman of Universal Enterprises. “To do this, our government must have sources of income. A detailed reform agenda has been proposed for this. In my view, it is an ideal reform programme.”
Manik congratulated President Mohamed Nasheed and “those who framed the reform agenda.”
Following consultation with the government over the proposed taxes, MATI said in a statement earlier this week that the absence of a taxation system in the country “similar to tax regimes successfully implemented in other countries” was a serious impediment to development and economic growth.
Old ways of thinking
Preceding the MATI chairman, Mohamed Waheed Deen, philanthropist and owner of Bandos Island Resort, argued in an impassioned speech that a taxation system was essential for democracy to deliver rising standards of living.
“This should have been done and finished 30, 40 or 50 years ago,” he said. “I sincerely thank our young President for beginning this effort today.”
A taxation system had to be introduced “because we are using the people’s property,” Deen contended.
“How can I say that I own Bandos?” he said. “It is not mine. It belongs to the Maldivian people.”
Taxation was the means for a more equitable distribution of wealth, Deen said: “Who wouldn’t want to send their child abroad for higher education? But can we facilitate it for them today?”
The government’s economic reform programme was necessary because “we do not want to keep the gap between rich and poor in this country anymore,” Deen asserted.
“What is the main reason a country becomes impoverished?” he asked. “I believe that one of the main reasons is refusal to tell the people the truth by many successive governments, many kings, until we have come to this point.”
In the Maldives’ long history, Deen continued, the public were indoctrinated to not criticise the government and given to understand that “only a particular group, from a particular family, could rule.”
Deen speculated that “the biggest challenge” the government’s economic reform agenda would face will be “changing people’s mentality.”
“This is the biggest problem facing our country today: [one side says] ‘everything is going right’ [while the other says] ‘nothing is going right,’” he explained. “So we have to educate our people, especially the councils.”
Deen also cautioned against unprincipled opposition to the government: “We could stay angry, hateful and disapproving and say ‘go on, run the government’ but sadly – remember this well – any harm this government suffers, the people will suffer many times over.”
Waheed Deen began his remarks by quoting the Quran 3:26: “O Allah. Lord of Power (And Rule), Thou giveth power to whom Thou please, and Thou strip off power from whom Thou please: Thou endow with honour whom Thou please, and Thou bringeth low whom Thou please: In Thy hand is all good. Verily, over all things Thou hast power.”
“Fruits of freedom”
MATI Secretary-General ‘Sim’ Ibrahim Mohamed meanwhile concurred that Maldivians could only
“taste the fruits of political freedom” by liberalising and modernising the economy.
Following graduation from the ranks of the Least Developed Countries (LDCs), said Sim, the country could no longer rely on loans and foreign aid.
“In a fundamental sense, taxes are what the people give to the government they elected to manage their affairs,” he said.
Contrary to popular opinion, Sim continued, MATI had been advocating a taxation system as the organisation believed a sound fiscal policy was essential for “day-to-day planning of business matters as well as national affairs.”
In addition to fiscal responsibility, he added, new legislation and strengthening of the judicial system was also needed to foster investor confidence while stalled development of new resorts should be restarted to spur employment and private sector growth.
Sim concluded his remarks by appealing to “everyone who has to pay taxes, please pay taxes.”
“Bold initiative”
In his speech, Sunland Travels Director Hussain Hilmy reiterated that the Maldives’ “economic policy and legal framework needs to undergo modernisation and reform.”
“We in the business community welcome the bold initiative being undertaken by your administration to carry out a programme of comprehensive economic and fiscal reform,” Hilmy said.
He added that businesses were “delighted” with the government’s policy of a “shift away from import duties as a major source of government revenue.”
Hilmy observed that for successful tax administration, “transparency, accountability, predictability and effective combating of corruption” were necessary “preconditions.”
While the local tourism industry “has been the main engine of growth in the Maldivian economy for the last 40 years or so,” Hilmy warned that “tourism as we all know is an extremely volatile industry subject to sudden shocks and highly sensitive to fluctuations in global economic conditions.”
He suggested that a successful tax system should therefore “ensure the competitiveness of Maldivian tourism in the global market place.”
“We in the tourism industry also welcome your efforts to reduce public expenditure and wastage and create a more efficient and lean government,” he continued. “I can assure that lest there be any doubt that there is full confidence on the part of the tourism industry in the proposed reform programme and we have every confidence that this programme will be able to deliver the kind of success that we all wish and the kind of prosperity that we all are looking for.”
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Plan sounds good, I hope the government is able to implement it. The problem with this government is that they are unable to implement any of their plans well. Good luck Minister Inaz.
Congradulations tourism and business leaders. You have taken a stand to support a policy that will fundamentally change the Maldives for better.
You are also sending a strong message to politicians to be a positive force in our young democracy. This reform deserves overwhelming support from parliament including heavy penalties for those who may be tempted to avoid tax.
Well done President Nasheed.
Of-course MATI should support taxation. Why? Because tax are deductible on investment and it is in the long term interest of tourism. Also by paying tax MATI can justify a stronger say in policy making. Of MATI is not paying taxes legally, they would be paying it anyway in the form of cuts and bribes. So a formal tax system should make their life easier.
Still its funny when Adalat made a policy pronouncement on tax saying that tax should be temporary. Amazing that they do not realize that tax is not optional. Governments just do not functions with tax money...
It's interesting to see all the tax debates, shame no one has the guts to take any decisions. Maldives Tourism Industry is 90% (or more) dependant on wholesalers worldwide. These contracts are generally done 01 year ahead. By not taking decisions early, the goverment is causing unnecessary problems with our partners.
They are all waiting to hear on the new tax and are therefore waiting with their bookings. They do not want to tell their guests that their holiday might increase with 2.5%. Instead, they are waiting or booking elsewhere.
Contracts for 2012 are already done, and the increase will either eat on the profits of the company or increase the cost of the holidays for the guests already booked. Many European countries have very strong legislation about prices, they cannot be changes once published. Imagine the effect of implementing any increase once prices are published, nothing can happen, except affect the resort operating in Maldives.
I am 100% behind taxes, however, the Maldivian government must realize not everyone can implement changes from one day to another. Decisions must be taken with 01 year lead time, not 01 month. That's just stupid.
Please announce change of GST for 2012 immediately + 2013 whilst you are at it. Otherwise it is just talk, no action!
No sane businessman or business community will oppose government plans weather taxation or what so ever. Guys like Universal chairperson who are educated people will understand the benefits of having a good and well organized government with good governance will benefit the country and its citizen and by being self sufficient their business will flourish and gain too. So why should they object to taxation.
Only gutter rats like Buruma Qaroon will object on imposing taxes. First he will not understand the benefits of the system to the country. He will assume to have all money that he make are exclusively his own forgetting that he is making money in specific geographical boundary; that means the people who live in this area have their rights on whatever he earns too.
Finally these fat cats are satisfied with their loot now they are willing to share and little bit of it with rest, Since, they don't have enough space in there vaults.
they should tender Kuruma and Bandos and Meeru for once..
Nobody in this country is essentially AGAINST taxation. The average new recruit to the MDP as well as their hired commentators must understand this fact. The reason why no political party or person could be against introducing modern forms of direct taxation is because:
- The State has run on a direct bed-tax and lease rents from tourism as well as import duties since a long time ago. Therefore taxation is in no way anything new.
- Additional and more direct forms of tax is required to finance the period of debt-service and sustain State expenditure in the future. Everyone already knows that.
The only argument is about Nasheed administration's lack of maneuvering room to allow for a suitable timeframe for implementation.
The tourism lobby's newfound enthusiasm for Nasheed's administration is due to;
- The administration's majority in Parliament giving them the ability to grant the tourism lobby their wisehs (99 year lease of resorts, private ownership of islands, deduction in TGST from 10% - 8%)
- The nature of the tourism industry which already consists of modern companies which have well-kept accounts. These companies are already prepared to pay taxes and would not be dented much by the proposed amounts.
The fact of the matter is, other industries are not as happy as they are ill-prepared and honestly annoyed by
- being unsure of the timelines and amounts by which import duties would be reduced or removed.
- having to pay business profits tax, income tax and also possibly tax on receipts from land rent altogether from accounts which have not been kept as well.
death and taxes are two things a person cannot escape in this world, unless you are a member of Adalat - they do not die.
This is impressive and good gesture both by the hanchos of business community and government. In a maldives full of contradiction, confusion and chaos, its a relief to see people from different strides getting together to cooperate rather than criticize, mock and create havoc.
superficial it maybe, but nevertheless its a good gesture.
It is either raucous sophistry against or awed unquestioning worship toward government policy.
When will we learn to contribute constructively to our governance?
I am underwhelmed.