Majlis committee recommends changes to tourism taxes and resort lease extensions

A People’s Majlis committee has recommended revising the Maldives Tourism Act and tax legislation in order to realise President Abdulla Yameen’s revenue raising measures as proposed in the 2014 state budget.

The committee has recommended collecting resort lease extension fees upfront over a two-year period, reintroducing the discontinued US$8 bed tax until November 30, and hiking Tourism Goods and Services Tax [T-GST] from 8 to 12 percent from November 1.

Further recommendations include increasing the airport departure charge from US$18 to US$25, and levying a 6 percent tax on telecommunications.

The revisions will be debated at an extraordinary parliamentary sitting scheduled for February 3.

Opposition Maldivian Democratic Party (MDP) MP Abdul Ghafoor Moosa has said the party will not support the revisions, claiming they amounted to an estimated 40 percent tax on the tourism industry.

“This will be a huge burden on the tourism industry. Instead of over taxing our most productive sector, the government needs to raise revenue through other sources,” he said.

MVR3.4 billion needed

Meanwhile, Finance Minister Abdulla Jihad said the revisions are not sufficient to raise the expected MVR 3.4 billion (US$224 million). The amount accounts for 18 percent of the MVR17.95 billion budget passed for this year.

The government had initially proposed collecting resort lease extension fees all at once within this year, collecting bed tax for 12 months, and raising T-GST in July.

The parliament committee revised the government’s proposals after a meeting with the Maldives Association of Tourism Industries (MATI) in which the organisation opposed continuation of the bed tax alongside an increase in T-GST.

According to the Maldives Tourism Act, bed tax must be abolished within three years of the introduction of T-GST. Bed tax was discontinued on December 31, 2012.

Committee Chair and Jumhooree Party Leader MP Gasim Ibrahim said if the new revision was passed, the bed tax and T-GST hike would only overlap in the month of November.

“This is because we may not be able to collect bed tax for January,” he said.

MATI Secretary General Ahmed Nazeer has also questioned the practicality of collecting resort lease extensions in a lump sum.

Speaking at the subcommittee on Tuesday, Nazeer said that only 17 out of the more than one hundred resorts had paid lease extension fees upfront when given the opportunity to do so under President Mohamed Nasheed’s administration.

He pointed out that Nasheed’s policy had been invalidated through the courts at the time. Moreover, resort owners had amended their lease agreements to pay lease extension fees in installments during Dr Mohamed Waheed Hassan’s administration, and revising agreements for a third time may present legal challenges, he said.

Meanwhile, MATI board member Solah Shihab has said resort owners might not have the cash at hand to pay lease extension fees upfront.

The government has also recommended revising import duties and leasing an additional 12 islands for resort development to raise money, though these measures have not yet been discussed.

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