MPs today debated amendments submitted on behalf of the government by the Maldives Development Alliance (MDA) MP Mohamed Ismail to exempt domestic air travel or ticket prices from Tourism Goods and Services Tax (T-GST).
The amendments (Dhivehi) to the GST Act of 2011 also proposed exempting goods sold at shops in resorts, guesthouses, and hotels that are exclusively for staff from the 12 percent tax rate.
A T-GST hike from eight to 12 percent – approved by parliament in February as part of revenue raising measures proposed by the government – came into effect on November 1.
Subsequently, local airlines Maldivian and Flyme imposed a 12 percent sales tax on ticket prices and increased airfare by about MVR32 per ticket.
“Now a [ticket] to a flight to Addu has gotten more expensive than a flight to Colombo. This is not, in any situation, how it should be priced,” former President Mohamed Nasheed told local media following the tax rise.
Presenting the legislation at today’s sitting of parliament, MP Mohamed Ismail said the purpose of the amendment bill was to exempt Maldivians from the tax hike.
While the bill was submitted on October 22 before the T-GST rise came into force, the MP for Haa Alif Hoarafushi noted that its inclusion in the agenda was slightly delayed.
The bill also states that any visitor who enters the country on a tourist visa shall be considered a tourist.
If the bill is passed into law, the GST rate for domestic airfare would be six percent.
The Maldives Inland Revenue Authority (MIRA) had anticipated MVR34 million (US$) in additional income as a result of the tax hike.
All MPs who spoke during the preliminary debate were in favour of the revision and the T-GST exemption for domestic air travel.
However, opposition Maldivian Democratic Party (MDP) MPs criticised the majority party or ruling coalition for approving the tax hike in February without the exemption for locals.
As the bill would have to be reviewed by committee before it could be passed, MDP MP Ali Nizar said the government had ample time to amend the law before November.
Jumhooree Party MP Faisal Naseem also noted that MPs would have known in February that T-GST would be charged for domestic airfare and goods sold for tourism workers.
“What I want to note today is, would we not have to propose an amendment again for a six percent refund?” the MP for Kaashidhoo asked.
If MPs wished to reimburse locals for the six percent extra charge, Faisal suggested adding a provision in the amendment bill during the committee stage.
He also called on MPs to expedite the legislative process and pass the amendment as soon as possible.
Following the preliminary debate, the bill was accepted unanimously with 60 votes in favour and sent to the whole house committee.
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.
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It was never the intented to really extract the T-GST from local travellers. But rather to scare the populous, rile the opposition and finally propose a counter-attack bill to fix the apparent problem and come out as heroes in the end. Well played.
This is actual government, unlike left so called MDP which made a tax on everyone now PPM tries to fix and they criticized!