T-GST rises to 12 percent

A Tourism Goods and Service Tax (T-GST) hike from eight to 12 percent approved by parliament in February has come into force today.

The tax hike was approved as part of revenue raising measures proposed by the government to raise additional revenue anticipated in this year’s budget.

One general manager has from a prominent resort told Minivan News that bookings appeared to be down for the month of November, with both guests and operators aware of the “double tax” as the T-GST increase combines with the bed tax.

“November will be tough,” he explained. “Top end resorts will really feel this. There’s no way further increases could be stood.”

Representatives from the Maldives Association of Tourism Industry (MATI) have also opposed the continuation of the bed tax alongside the T-GST increase, though the IMF has suggested that a 12 percent tax rate on the Maldivian industry remains “quite low” due to its high rates of return.

Other measures included reintroducing the US$8 tourism bed tax, reversing import duty reductions, raising airport departure charge for foreign passengers from US$18 to US$25, leasing 12 islands for resort development, and introducing GST for telecommunication services.

Introduced in 2011, T-GST generated around MVR2 billion (US$129 million) between January and September this year – equal to just under 24 percent of all government revenue.

In its latest quarterly economic bulletin, the Maldives Monetary Authority (MMA) warned that total revenue collected in 2014 could be lower than budgeted due to compromises by parliament in passing the revenue raising measures.

For example, initially the 2014 budget anticipated the implementation of Tourism Goods and Services Tax (T-GST) hike— from 8% to 12%—in July 2014 but it was delayed to November 2014,” the central bank explained.

“Similarly, the continuation of the Bed Tax was delayed by a month and it is to be discontinued after November 2014, as opposed to the anticipated collection of Bed Tax throughout the year.”

In addition, the MMA explained that payments for resort lease extension fees, which had been anticipated to be received in full under the proposed budget, were later revised to be paid in instalments over 18 months.

Finance Minister Abdulla Jihad told parliament’s public accounts committee last month that the revenue shortfall would amount to MVR1.5 billion. Consequently, the initially projected MVR1.3 billion deficit in this year’s record budget is now expected to rise to over MVR4 billion.

Last month, the finance ministry imposed cost cutting measures in a bid to rein in the ballooning budget deficit.

The parliamentary subcommittee that reviewed the revenue raising measures had recommended revising the government’s proposals following consultations with the MATI.

Appearing before the subcommittee, MATI Secretary General Ahmed Nazeer also questioned the practicality of collecting resort lease extension fees upfront.

Only 17 out of more than 100 resorts offered the opportunity by the administration of former President Mohamed Nasheed to extend leases with a lump sum payment were able to do so, Nazeer said.

Resort owners had amended their lease agreements to pay extension fees in installments during Dr Mohamed Waheed Hassan’s administration, Nazeer noted, and revising agreements for a third time could present legal challenges.

Speaking with Minivan News today, the anonymous GM suggested the government focus on its own austerity measures, or risk losing guests to more “cost-effective” destinations, though the IMF earlier this year had


6 thoughts on “T-GST rises to 12 percent”

  1. Tourism is indeed the chicken that lays the golden eggs that line the pockets and swiss bank accounts of the greedy tycoons that funded and profit from the coup.

    Without that money, their control of street gangs, the police and judiciary will be damaged beyond repair.

    That is why it has to be decapitated. Sorry, chicken. It's not your fault. I will make it painless, and give you a proper burial and I will not desecrate your corpse.

  2. Tourism industry is the engine for our economy and it provide huge amount of jobs, over 70% of Gov revenue is generated through tourism .

    But sad thing is that people like Nasheed still continue his boycott campaign and try to damage the industry by having false information given to international community.

    He thinks that by damaging tourism industry will help him to win the presidency and hearts and mind of the people.

    He thinks that when he become the president , international community will give billions to him to run this country.

    But it did not happened and will not happened.

    But he does not understand ten millions of dollars that his family had pockted and put in swiss banks are earned from resorts that Sasfaru tours had earned in last 40 years .

    Nasheed spent half of his life in UK and lived a lavish life out of those money from Safari tour resorts.

  3. @Hero

    Indeed. It's that 70% revenue that funds the government's control of gangs, and the corrupt institutions. We Maldivians are underpaid, abused and when we demand fair wages, you send gangsters and murderers in riot gear after us.

    We will never forgive you.

  4. @Hero

    The chinese dont give a rats arse about boycotting or anything.They are coming in hordes and why are you worried and where do you get your stastics from.Probably from dhitv right.That shows your lizard brain capacity


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