Government proposes revamping taxes and resort rent

The government plans to revamp taxes and rent from tourist resorts to revitalise the industry, Tourism Minister Dr Ahmed Sawad has said

Speaking to Minivan News today, Sawad said the current fixed costs of bed tax and lease rents served as a disincentive to investors.

Under the government’s proposed scheme, tourists will pay an ad valorum tax instead of a fixed bed tax. This means tourists will pay a percentage of the room rate rather than the fixed rate of US$8 per bed.

Last month, Eugene Radilesku, a consultant from the International Monetary Fund, said the government needed to capitalise on revenue from the tourism industry. For a hotel room that ranges from US$200 to US$500 per night, he said, the government only earned about US$8 in revenue.

Sawad said the lease rent for islands will also be changed from a fixed rate to one that is varies with the area of land.

All resorts will be subject to the changes, said Sawad. “We have very high lease rents and this creates a very high room rent, which is a vicious cycle. This will also encourage investors to continue development of resorts under construction.”

There are currently 58 resorts under development.

The new structure would also lower investment and enable resorts to make profits sooner, resulting in more mid-range resorts, said Sawad.

The government planned to submit a bill on ad valorem tax to the next session of parliament, he said, along with legislation to replace lease rents and extend the lease period from 35 to 50 years and beyond.

Dr Abdullah Mausoom, opposition Dhivehi Rayyithunge Party (DRP) MP for Kelaa, said the party’s views will be made known at the parliament floor when the bill is debated.

“One thing I have learned is that there is not enough consultation with stakeholders,” he said. “It’s very important that stakeholders in the tourism industry, who will be the most impacted by this, are consulted.”

He added DRP will be meeting with the Maldives Association of Tourism Industry (MATI) to discuss the matter.

Mohamed “Sim” Ibrahim, secretary general of MATI, told Minivan News today that the government gave a draft of the ad valorem tax legislation to the association today.

“There are several proposals the government has put on the table,” he said. “We have to see which of these is best for the country.”

The government needed to consider the impact on the industry, he added, and the introduction of taxes should be gradual.

“We can’t talk about quick solutions and knee-jerk reactions,” he said.

Sim said he did not think ad valorem taxes would lower the cost of investment. “I think it will be higher. It is much easier now because you know exactly what you’re paying and how you’re paying.”

But, he added, the government was consulting with MATI and other stakeholders in the industry.

“There is a process of exchange of opinions and ideas,” he said.

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