The tourism industry in the Maldives is worth three to four times more than previous estimates, President Mohamed Nasheed acknowledged during a press conference this morning with journalists, ministers and industry leaders.
“Previously we had thought tourism receipts for the country were around US$700 million. But since collection of the 3.5 percent Tourism GST it has come to light that the figure is around US$2.5-3 billion,” President Nasheed said.
”I was told that the government’s expenditure was too high, but I told them it was not that the expenditure was high, but that the revenue was too low. There are not many ways we can decrease the expenditure of the government,” Nasheed said.
Nasheed was speaking ahead of parliament’s resuming sessions next week, where the ruling Maldivian Democratic Party (MDP) hope their new voting majority will push through major economic reforms. Most ministers were in attendance, as well as senior industry figures including Jumhoree Party (JP) leader Gasim Ibrahim.
Secretary General of the Maldives Association of Tourism Industry (MATI), Sim Mohamed Ibrahim, suggested the US$2.5 billion figure was optimistic, “as a lot of it is guesstimate.”
“The TGST income is variable depending on season, occupancy and volume of business,” he explained. “If they are projecting the figures from Jan-March for the rest of the year, that is the biggest time of the year and the figure will be very rosy. It may be a few years before we can calculate this accurately.”
Nonetheless, “the government will have a lot more money at its disposal for national development,” Sim predicted.
“I don’t think traders will have any problem paying taxes so long as other charges and levies are lowered. What business needs is predictability – this has been lacking in the past, particularly the calculation of rent and lease periods. They need confidence in the system, and things to be spelt out clearly. I think this is now happening.”
Historically the government had derived most its revenue from import duties, followed by bed taxes on the resorts, President Nasheed explained, both of which ultimately be abolished in favour of a modern tax economy.
One impending change – which was not given a date – was the sale of land for commercial purposes, Nasheed said, with all land, including resort islands, becoming a tradeable commodity.
“Ultimately that is where we have to go. I understand that this not the law right now,” he said.
The Maldives currently does not recognise freehold land, and furthermore lacks a central register of land ownership. Currently land is owned by the government and leased to commercial operators, although these agreements can extend up to 99 years. Resort leases are shorter, but under the current government are extendable to 35-50 years when a certain percentage is paid upfront.
Sim observed that only 20 percent of resorts had invested in the longer leases, “either due to their income [required for the upfront payment] or because the banks aren’t lending.”
“[Land purchase] might be an advantage to the industry, as resort land has always been treated differently,” he said.
“It was briefly introduced in the past but was later revoked. Given the shortage of land in the Maldives, land ownership can be a touchy subject. But now it is possible for the government to reclaim land.”
Nasheed has previously observed that the government’s new financial changes, which include an income tax and a general GST it hopes to approve in parliament, were “perhaps far more radical that introduction of political pluralism in the semi-liberal society that we had.”