Tourism Ministry hits back at MIRA accusations over failure to collect resort rents

The Ministry of Tourism has hit back at claims made last week that it was failing in its duty to collect rents and associated non-tax revenue from the country’s largest industry.

Following claims made by the Commissioner General of Taxation at the Maldives Inland Revenue Authority (MIRA) that the tourism ministry was failing perform its duty of collecting such revenue, State Minister for Tourism Mizna Shareef has called the accusations “baseless and unfair.”

“Under the new tax regime, MIRA can go after those who don’t pay rent,” said Mizna. “It is very unfair and inappropriate for MIRA to make these statements.”

Mizna argued that the authority had been pressuring the tourism ministry to suspend operating licenses for late-payers without considering the wider implications for the industry as a whole.

“There has to be balance – the industry must be protected while rents are collected,” she continued.

Tourism is by far the largest industry in the country, contributing over 70 percent of GDP via associated industries and 90 percent of all foreign exchange receipts.

Allegations by groups in support of the now-opposition Maldivian Democratic Party (MDP) linked several prominent Maldivian resort operators with February’s disputed transfer of power.

A travel advisory created shortly after the transfer rated resorts on a traffic-light system, urging against travel to resorts marked ‘red’ – being linked with the alleged coup-makers. The site has since been taken down.

The recently completed Commission of National Inquiry (CNI) ruled that the transfer of power had occurred within constitutional boundaries – a decision over which the MDP has registered strong reservations.

Tourist arrivals have continued to rise this year, with the Asian (largely Chinese) market taking up the slack from a downturn in European holiday-makers, although growth has slowed considerably in comparison with last year.

Director General of Revenue Service at MIRA, Fathuhulla Jameel, was not responding to calls at the time of press.

Lease extension

MIRA’s figures for August showed that ‘Tourism Land Rent’ collected last month was only 19 percent of the amount collected in the corresponding period last year.

Tourism land rent for the year so far is shown to be only three quarters of that collected by the same point on 2011.

The importance of this revenue stream can be seen in the share of overall revenue tourism land rent alone contributes to the authority’s figures – making up 10 percent of MIRA’s income this year.

Another important source of tourism revenue comes from lease extension payments from resort operators – islands are ultimately the property of the state and are leased to the operators on long term bases.

Mizna took issue with the suggestion that the government had re-interpreted the lease extension payments with detrimental effects for the state’s annual budget.

MIRA’s figures show that revenue from lease period extension fees has been US$11million (MVR 168 million) so far this year, compared to US$20million (MVR 273 million) at the same point in 2011.

Mizna argued that the initial arrangement for the collection of lease extension payments had not been fully elucidated by the courts prior to the current government’s assumption of office.

A High Court ruling last December ruled in favour of the 2010 second amendment to the Maldives Tourism Act after it was said to contradict article 8 of the original legislation, pointed out Mizna.

The second amendment states that fees of US$100,000 for every year extended should be paid over a period of between 18 or 36 months depending on operator’s status when the act was published in the government gazette.

The Nasheed government had requested that the payments be made in a lump sum.

Former Tourism Mariyam Zulfa, speaking shortly after the new government took office, explained the Nasheed government’s reading of the system.

“The second amendment to the tourism law came into place it gave the option for resorts to extend the existing 25 year leases to 50 years. A time period was given and there is a clause that stipulates that the payment must be done in completion before the lease period can be extended,” she said in March.

“So, the Nasheed government had interpreted that clause as the payment to be paid in full for the period extended. So, because the wording is such that the payment must be complete before the extension is granted, we interpreted it as the full payment,” she continued.

“But there is another clause which says the manner in which the payment is calculated is on an annual basis. This government has over-interpreted that clause and has said that the payment has to be made annually,” argued Zulfa.

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