Legislation proposed by the government to raise the airport service charge from departing international passengers to MVR460 (US$30) was narrowly rejected by parliament today.
The amendment bill submitted by government-aligned MP Riyaz Rasheed was rejected with 28 votes against, 27 in favour and two abstentions.
At the parliamentary debate on the bill yesterday (April 15), MPs of the opposition Maldivian Democratic Party (MDP) and government-aligned Progressive Party of Maldives (PPM) opposed the proposed hike.
MPs of both the majority and minority parties alleged that President Dr Mohamed Waheed planned to use an expected MVR185 million (US$12 million) from raising the departure tax to finance his presidential campaign.
The 1978 law imposing the airport service charge on departing passengers was first amended under the previous administration and raised to US$18.5 for foreigners.
The imposition of a similar Airport Development Charge (ADC) of US$25 by Indian infrastructure group GMR was previously a major point of contention for the Waheed administration, which terminated the concession agreement with the GMR-led consortium to modernise the airport in December 2012.
Hiking the airport service charge from US$18 to US$30 was among a raft of measures proposed by the Finance Ministry within the estimated 2013 budget to raise MVR 1.8 billion (US$116 million) in new income.
Finance Minister Abdulla Jihad told MPs in December 2012 that additional revenue was needed to finance the fiscal deficit and rein in soaring public debt, which was projected to reach MVR 31 billion (US$2 billion) or 82 percent of GDP by the end of 2013.
On January 29 this year, the cabinet decided to impose austerity measures to manage the budget following revenue shortfalls.
“Members of the cabinet noted that, by late this year, the country might have to face enormous challenges unless strict budgetary control measures were not implemented,” the President’s Office said at the time.
During the budget debate in December 2012, Majority Leader MP Ibrahim Mohamed Solih warned that the additional revenue projected in the budget was unlikely to materialise.
The MDP parliamentary group leader noted that most of the proposed measures – such as hiking the Tourism Goods and Services Tax (T-GST) to 15 percent, introducing GST for telecom services, and “selectively” reversing import duty reductions – required parliamentary approval.
Acting Finance Minister Ahmed Mohamed was unavailable for comment today on the impact to government finances from the loss of projected revenue.
Meanwhile, legislation on fiscal responsibility submitted in 2011 by the previous government was passed with 42 votes in favour and 10 against at a sitting of parliament on Monday (April 15).
If the bill is ratified, the government would be prohibited by law from obtaining loans after January 1, 2016 to finance recurrent expenditure or loan repayment.
The bill also sets limits on government spending and public debt based on proportion of GDP, mandating the government to not allow public debt to exceed 60 percent of GDP.
Borrowing from the central bank or Maldives Monetary Authority (MMA) should not exceed seven percent of the projected revenue for the year, while such loans would have to be paid back in a six-month period.
Moreover, a statement outlining the government’s mid-term fiscal policy must be submitted annually to parliament at the end of the financial year in July.