Government’s proposed revenue raising measures excessive, warn resort managers

Several resort managers have voiced concern that revenue raising measures proposed by the Finance Ministry will affect the financial viability of the tourism industry while providing little improvement in service or support in return.

The proposed measures were part of an ‘austerity’ package sent to parliament’s Finance Committee last week in a bid to address the country’s crippled financial condition.

Increased government spending – such as the repayment of civil service salaries cut during the former administration, and promotions and lump sum payments to the police and military – has not been offset by additional income.

As a result, the government has sought a succession of loans this year to pay its expenses at a time it is facing political challenges to its legitimacy, and country is facing plummeting investor confidence, a drop-off in foreign aid, an ongoing foreign currency crisis, and the challenges of its 2011 graduation to the UN’s definition of ‘middle income’.

As well as a raft of austerity measures, including the cancellation of electricity subsidies for citizens in Male’ and “reform” of the universal healthcare scheme, proposed revenue raising measures include plans to:

  • Raise import duty on oil to 3 percent
  • Impose import duty on items whose value exceeds MVR6.4 million
  • Raise import duties for liquor
  • Introduce GST for telecom services and sale of flats (both are now GST-exempt)
  • Raise GST rate for luxury items
  • Raise T-GST to 15 percent
  • Raise airport service charge for foreigners to $30
  • Increase visa fee for foreigners by MVR150

Minivan News spoke to several resort managers about the potential impact of such measures on the tourism industry. Of particular concern was the proposed increase in Tourism GST from 6 percent to 15 percent.

“That would be the biggest hit along with the liquor duty,” observed one manager.

“With the standard 10 percent service charge we’d be talking 25 percent on top. That’s too much,” he said.

Furthermore, a sudden increase in T-GST would force resorts to absorb the increase, due to contractual obligations.

“If such an announcement came after [the] contracts are signed, many operators would be forced to absorb the additional percent again,” the manager observed.

“Higher duty on liquor would be the most directly felt increase in guests’ daily extras. Our sales would take a hit,” he added.

An increase in already high oil prices due to government import duty would further increase prices.

“Oil has become more and more expensive since oil was first used. Another rise in prices would be just another rise, which, in the case of oil, would come anyway. Of course extra costs will eventually be passed on also from suppliers and will at one point always end up on the client’s bill. How much more of such a hike our clients will take, I couldn’t say. Already now the low- and mid-priced market segments are moaning,” he said.

The increase in airport charges to US$30 for foreigners would also increase the overall cost of the destination for potential visitors.

“Many other places charge one as well and I guess it has come to be accepted. If this is then garnished with higher visa fees, taxes of 25 percent, an eco-tax, bed-tax and the whole lot, it might quickly get too much though,” the manager warned.

Another resort manager told Minivan News that given the country’s almost total reliance on tourism, the government “needs to see itself as a tourism body as much as a government of a nation.”

“Tourism bodies in a general have five key responsibilities in order to increase the economic benefit of tourism for a nation,” he said: “Attract guests to the destination, have them stay as long as possible, have them invest back as much as possible into the local economy, have them recommend the destination to their friends and/or return themselves, and encourage balanced tourism development.”

The Finance Ministry’s proposed revenue raising measures “have negative implications for all five points of any basic tourism body plan,” he observed.

“As seen in the past 2-3 years, most countries have based their austerity strategies on reduced government expenditure and encouraging increases in revenue growth. This has been completed by efficiency plans for civil servants and key strategies to increase revenue,” the manager noted.

“In its actions over the last five months, the Maldives’ government has increased civil servants’ salaries, increased other costs, and are now looking at taking action that will compromise their main revenue stream. This is very different to other countries with similar financial challenges,” he stated.

“Whilst I understand that there is a need for a major revision on the Maldives economy, I would hope that cost reduction measures are implemented within the government that will balance the need for increased taxes on Maldives’ tourists. Areas of increased taxation such as oil and customs duty would be more acceptable psychologically for the tourism economy rather than an increase in direct tourists taxes and charges,” the manager added.

According to a survey conducted by the Tourism Ministry in 2011, 46 percent of tourists to the Maldives believed that the accommodation was too expensive.

Soft drinks, alcohol were also rated expensive by 42 percent, while food, water and souvenirs received a similar ranking from 41 percent of tourists polled.

Tourism Minister Ahmed Adheeb and Deputy Tourism Minister Mohamed Maleeh Jamal were not responding at time of press.

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17 thoughts on “Government’s proposed revenue raising measures excessive, warn resort managers”

  1. make resort owners pay the price, they brought down Nasheed's government to get away from tax....eventually they'll organise another coup to bring wown baghee Waheed

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  2. "....Already now the low- and mid-priced market segments are moaning,”...

    Moaning? I wish they were only moaning. They are just not coming to Maldives anymore. A quick look at the occupancies achieved in August is all that is needed to realize it.

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  3. New regime can not add up or keep their hands out of the till!!

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  4. Don't worry we won't be coming to the Maldives - it is already known as a "rip off", low standard, dangerous and politically unbalanced destination. There are plenty of alternative holiday destinations in the world the offer good service and value for money.

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  5. MDP is not one to talk about preserving Maldivian tourism, since they have already done enough to cripple the tourism industry oversea's, in July of 2012 their leader Anni was the one who called for tourists to boycott Maldives while in New York.

    http://minivannewsarchive.com/politics/the-last-resort-nasheed-calls-for-tourism-boycott-40161

    The reason why the Maldivian state budget is in such a mess was because of the silly and unproffessional way that MDP ministers forecasted and prepared the budget, overplaying revenue by including ludicrous revenue sources, and understating expenditure. As a result, much of the income that MDP govt forecasted was merely vapour. In 2011 and in 2010, MDP govt adjusted to this by not holding back on bills after obtaining service.

    Take a look at IGMH's audit report and this will prove true. In a bid to improve cashflow situation, in 2010 and 2011 MDP Finance Minister ordered all payments to go thru FInance MInistry (electricity, water, phone). By holding back on paying these bills MDP govt was able to save hundreds of millions, and the state companies such as MWSC, couldnt do anything since they couldnt take action against state since MWSC itself was a state company. MDP effectively abused this loophole that state could not take action against state.

    This is an exempliary example of how low MDP govt was prepared to stoop, by not paying for services once they were rendered. As a result MDP was able to decieve the common people on the real state of the country's budget crisis.

    The Audits are now revealing what MDP govt did. YEt, MDP will find a way to dump this issue onto something else, saying they had a plan for all the unpaid bills that they didnt pay. MDP is the perfect symbol of what dirty politics, and deceptive politics is all about.

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  6. Nasheed made a grave political mistake in extending resort leases. He was brought to power by the resort owners (inc Gasim) to extend leases by another 50 or so years.

    After this was accomplished, Nasheed's 'use' had ceased.

    Old Maldivans saying: Once banana is reaped, the banana tree has no use.

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  7. Nasheed used the resort owners to become the president and once got the the post he forgot who had help him to become the president.

    Nasheed thirst for money and power is a known fact. He had got the feel of public wealth for his self promotion and now again want to come back to rob the last bit of what is available in our country.

    This guy had sold airport to GMR for peanuts, sold Dhiraagu shares for peanuts just because cable and wireless funded for his campaign.

    These just few example and all the audit reports that are coming out speaks itself and show how much money this guy had robbed.

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  8. It is time we did away with the tourism industry and its associated evils of alcohol selling and mixing of non mahrams.

    The profit motive is no excuse. Richer civilisations than us, who also traded in sin, have perished by the wrath of our creator.

    Beware the waters that may submerge you o'island men, for they may wash you away to a place of fire and torment.

    Repent and God may yet spare our despicable civilisation and let it go on breathing the salty air.

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  9. I think people forget about Indian based Apollo Hospital bid for developing and managing IGMH, signing Memorandum of understanding with Health Ministry etc.,. I think Apollo hospital is really intelligent and lucky compare to GMR. Here people want every thing free, like IGMH given by Government of India.

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  10. Another feather in the hat.

    Destruction from within is a well known culture among Muslims.

    Ramazan is passed now, you can spice up the hatred and self destruction.

    Great. Good job. Well done!! Outstanding.

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  11. There is another way: how about growing the industry? While some markets have shrunk, like UK and Italy, others have grown, like China, Russia, and Germany. The economy is not a fixed pie to be divided up... it is a pie that can grow with proper policies. How much money does the gov't need? Well, how much bigger can the tourism industry get? Is it inconceivable to suggest we could have 1.5 million tourists? How about 2 million tourists? Actually, these numbers are not fantasy when you consider the strong image of Maldives globally and the success of the destination in sustaining growth even through global financial recession, Tsunami, and major political change. Rather than raise taxes and costs - all of which will dampen growth, how about grow the industry more? Would certain policy changes result in faster growth? Well, for one, a more attractive foreign investment policy would be helpful. Foreign investors are put off by the way business is done in Maldives, the courts, and the challenges of working to do straight forward things like register a foreign company, employment laws, customs rules, etc..

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  12. @adam

    So there is another way -diversify into new markets. What an innovative idea!! Now, why did no one thought about it!!

    Sorry, my intention is not to ridicule you, but please allow me to use your comment to pass a positive message.

    The way you have expressed ideas TYPIFY and EXEMPLIFY EXACTLY how the new political appointees and new graduates to government talk. ie, unconstrained thinking which say do this, do that.

    You say a lot in volume but there is nothing of substance, no directions, no prescription, no diagnosis, no examples.
    Unfortunately, this is the kind of talk that is most common in Maldives today. Such views unfortunately gain momentum and DOES become POPULAR regardless of feasibility.!!!!

    This kind of 'simple idea floating talk' perhaps makes the one feel like a ingenious in front of a clueless public in Maldives. Unfortunately, with our new democracy, policy making has now become synonymous with idea floating. And we know, with internet, one is never short of ideas. And what you said is just how our Miister's talk.

    @Adam. If you are willing to continue this conversation as above, and repeating the same thing over and over, you actually have a very good prospect of being a Minister of Tourism. Its not a bad idea to appear on few TV channels and you WOULD be believed, if neatly delivered. Forget the internal inconsistency of your talk.

    PS.
    This comment is NOT meant to be personal - just to want to warn the general public of a severe out break of 'oral diarrhea' in society today in the aftermath of democracy in Maldives.

    I support freedom of expression. I am against abuse of that freedom.

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  13. The cat is out of the bag for the Maldives now, it was once an exotic destination for Europeans to escape the winter. Most people know someone who has now been to the Maldives and over all, the majority of the people I speak to while working at Trailfinders, a prestigious world wide travel agency, do not with to return. Now the Maldives has competition id did used to have, both in tropical destinations on the African continent and other Asian countries opening up that used to be off limits. For example Northern Malaysia, Vietnam, there are now some amazing properties and beaches in Cambodia, Thailand etc. To put it simply, the Maldives is the 9th largest leisure destination at Trailfinders, yet it hold the majority of complaints from clients. The Maldives is simply over priced for what it delivers as a whole, with the exception of a few resorts, that tend to be part of a multi-national chain, conflict resolution between resorts and the customers is way below what is required..

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  14. @ Tom (UK);

    I totally agree with you Tom. The Maldives has lost its charm due to overpricing. If this government wishes to go along such a path of self destruction with overtaxing, then so be it. My only concern is that we are all dependent on the tourism industry. The government through their bodies, such as the tourism board, must entice more tourists to visit our country and thus, fill up the actual resorts. Only by bringing fair value for the money and by offering competitive tourism services, will they achieve this. Definitely NOT by hiking taxes and duties. we would be shooting ourselves in the foot.

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