To celebrate her son’s eighth birthday, Aishath Niyasha* decided to take him and his friends to the swimming pool at Hulhule Island Hotel.
On arrival she was asked to provide a copy of her ID and told that it was a new rule of the hotel. As the kids splashed around in the pool, Niyasha ordered some juice and asked the waiter to bring her the bill for the usage of the pool as well as for the drinks.
Surprised to see Goods and Services Tax (GST) included in both bills, Niyasha told the cashier that since she was a Maldivian she should be exempt from it. His reply albeit in a joking manner was “talk to the esteemed parliamentary members, they are making us do this.”
Scenes like this are played all over the country as confusion has risen between local customers and service providers since the implementation of Tourism GST of 3.5 percent at the start of this year.
Maldivians and work permit holders voice their right to be exempt from GST, which by law is only applicable to holders of a tourist visa, while some service providers charge GST to all their customers.
Confusion
David Jones*, who has lived in Maldives for over 10 years and holds a work permit, says he is frequently asked to pay GST.
“Showing them my work permit and saying a bit forcefully that I am not obliged to pay GST works most of the time.”
He says it’s just a matter of principal, as the amount of GST at 3.5 percent is very low. He finds that most of the time the management, and the supervisory level staff in resorts and hotels are well informed and aware of how it should work. “Though seems in a lot of places the junior level staff are not well briefed.”
HIH duty manager Shafeeg says the hotel’s policy is “when a copy of the ID is provided, the client would not be charged GST.” Shafeeg says that all the staff at HIH have been informed and expressed surprise when informed of Niyasha’s poolside incident. He pointed out that HIH has a notice plastered near the cashier asking clients who are eligible to be exempt from GST to give a copy of their IDs.
Likewise Bandos Island Resort and Spa, one of the oldest resorts in Maldives, and one that is frequented by both tourists, locals and a large number of expatriates, says it follows the law to the letter.
“We do exactly as the law requires us to do, we only charge tourists GST” says Thoha Ali, Sales Manager of Bandos. “All the concerned staff has been briefed.”
Ali admits when GST was first introduced there was confusion. “We outsource our system, so it’s a ready-made programmed for billing; hence it took a while to modify it to suit the requirements.”
Niyasha, who ended up paying the GST, says she would be less bothered if she could be sure that the amount she paid is handed over to Maldives Inland Revenue Authority (MIRA) and not pocketed by the hotel.
Informing MIRA
“MIRA will audit all the establishments from time to time,” says Fathimath Rasheeda, director Tax Payer education and Facilitation at MIRA, to ensure that nobody can take advantage of the system. Since the implementation of GST at the start of the year, MIRA had collected US$7.2 million in January and US$6.6 million in February.
“We did get a lot of complaints from Maldivians, especially at the onset of the GST implementation” says Rasheeda. To counter this problem MIRA issued a notice in January informing all Maldivians and work permit holders not to pay GST, and to inform them of any establishment that does so.
“Unless the public informs us we will not be aware of which establishments charges non-tourists, as it would be impossible to tell from the bill who the customer is.”
Hotels in turn have complained to MIRA that customers at times do not provide the paper work that would make them exempt from paying GST. Rasheeda says “MIRA require documented proof, so it’s always better if an ID or work permit card is provided.”
This in turn leads to the question, who will do the photocopying? Some hotels and service providers seem to find it a time-consuming bother to check the ID of clients and to make exemptions for clients not to pay GST.
While some hotels complain that photocopying IDs and work permits is an unnecessary expanse, HIH staff told Niyasha “we will photocopy your ID just this once, but make sure you bring a copy with you next time.”
So it appears that the onus is on the clients to carry around photocopies of their IDs or work permits if they want to be exempt from paying GST. Given the high price of photocopying in Male’, it might be just cheaper to pay the 3.5%.
*Names changed on request.
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As a frequent visitor to The Maldives I view the imposition of a tax on foreigners to be a blatant form of race discrimination. It also gives some business the opportunity to profiteer from tourists by inflating their prices even higher.
On my last trip six weeks ago, I flagged a taxi on Hulhumale to take me to the ferry - a ride of about 5 minutes which the day before had cost me 10Rf. This day, the taxi already had a couple sitting in the back but I was happy to share. When we arrived, the driver charged me 20Rf and the couple 5Rf (he tried to be discrete, but I'm not stupid). I didn't complain, but for the rest of my two weeks' stay I simply left the hotel a few minutes earlier and walked. His loss, not mine.
This two-tier system of charging can often be hidden when prices are being quoted in dollars, as opposed to rufiyaa. For instance, I once saw a shop selling cans of Coke for 10Rf or $2 - a clever way of trying to disguise an inflated price for the unwary foreigner. If you came into my business in the UK and I looked you up and down and charged you more than someone else, I could be prosecuted.
Your government should take note. Some of us know what you're doing and we don't like it. It causes bad feeling and a sense we're being ripped off when we come to your country. We're more likely to return if we feel welcomed rather than conned.
Hi Kevin, in UK we are charged more than double the amount the locals pay for their tuition. If the locals pay 3000 pounds then we have to pay 8000 pounds. And do you know how much and how many times we have to pay to get a student visa? First they'll say a phone number is not there and return and we'll have to resubmit with visa fee again. It goes on and on. Talk about discrimination.
for ur information if u were charged Rf10 for a texi ride in hulhumale', that means u were undercharged...the standard rate ins Rf 20 both in hulhumale' and male'...
Kevin...ur so right....i could say i was there! the ;list could go on beyond a texi ride u know...
why are tourists so much concerned about Maldives and our economy? the GST was only introduced months ego and it seems like they have something to say and talk about how good their own country is. why? because they are required to pay few more bucks than it used to be? well, thats the law. get used to it. we dont complain about such things when we go to other countries...
How is it that the HIH knows Maldivians just by looking at them if they are seeking a drink at the bar, but not when they want to extract this tax?
nobody would have to pay any taxes at all if the government could cut spending... 86% of all government spending is on wages; 96% of that is spent on civil servant salaries but the civil service commission refuses to allow government to reduce the size of the civil service. until the government (is allowed to) deal with the wage bill, taxes on tourists and Maldivians will keep going up.
Well why do some foreigners (not all!!) get so worked up talking about the system here? What angers me is that we are so discriminted and unwelcomed many a times in their countries. Despite that, most of us fulfill our purpose of visit and return home without showing our attitude!! The system here may not be the best but then one should understand that we are also in a major transitional phase.
There has to be a better system than all non GST paying persons walking around with armloads of photocopied IDs - not to mention the misuse of paper for these multiple photocopies... each ID is usually photocopied onto an A4 piece of paper.... sheer madness
@Kevin Armes
"For instance, I once saw a shop selling cans of Coke for 10Rf or $2".
There'll always be people like that. For one thing, I'm sure it's illegal for them to charge in dollars in any case.
Now, regarding your point about discrimination and the GST; I don't think this is a particularly valid point to compare, for example the UK VAT to our GST.
You also make it sound as if the locals aren't paying any taxes. They do indeed. There's a heavy import duty on everything consumed here.
The GST is designed to take away arbitrary taxes previously imposed on the tourism service industry.
Someone else has already pointed out the double standard tuition fees charged in the UK education sector. In fact foreign students are one of the biggest contributors to the UK economy and they are charged anywhere from 200% to 400% above what the locals pay!
It just so happens, tourism is one of the biggest contributors to the Maldivian economy, and just like the UK government, we're trying to ensure the country gets a fair price for the service it's providing when you come here. Now, you may say, why charge the poor old tourist instead of taxing the hotel operator? Well, either way, the prices will be passed onto you! The GST makes it a more transparent process.
@kevin
The Taxi charge of Mrf20 is the standard, he probably figured with one paying "Ingiresi" (English) customer, he could take a reduced fare from his friends. Unscrupulous traders overcharge tourists in many countries, it is not govt condoned, laws are unenforced. If you have visited Taj Mahal in India though you will know the exorbitant price they charge to tourists (in comparison to locals), I was happy to pay though, it was worth it.
Although I don't see why T-GST should not be levied on locals and expat residents.
This is an important matter and media must report these matters so that people will be aware of such things.
As long as the law says then the local are exempted from GST and any service provider has no right to charge it as it is illegal. If the locals are charged in as reported here it will not be contributed to tax. Thus the service providers may take advantage of it illegally. Therefore every local must be aware of this and should straightaway refuse to pay it.
The tourism sector treats Maldivians as second class customers. HIH, Resorts and Air Taxi are prime examples. I am not surprised at their attempt to pass on the T-GST to local customers. @Kevin armes you are right at overcharging foreigners but it is commonly practiced in all countries as several commenters here have pointed out. European countries (and some others) even charge us to enter their country when we don't.
Hi, I find the requirement of having to provide your own copy of the permit strange. Why is not enough to show the permit? Making multiple copies is an unnecessary expense for the permit holder and an administrative burden for those who have to file and process them.
Dear Kevin,
I am really sorry you had an unhappy experience in Maldives.
In the first instance, you were charged half the amount for taxi fair, which is 20 RF actual fair. May be you met a nice taxi driver, who did not want to charge you whole for a short distance. There are people like that everywhere.
In the Uk we are paying 11000 plus pounds for our tuition fees, where local studetns pay 3500 pounds. Does it mean we have to go on the road shouting discrimination? No. That is the way things have been arranged. Just the same as a tourist tax has been initiated in Male'.
Also the houses where we have to stay. Such old houses which are rented at a high rate, and if furnished, the furniture is at such a bad condition, that I am afraid to touch anything in case it might break. There are no proper house leasing regulations which gives all the advantage to the landlord and few if not none to the student. So there are different things in different parts of the world that we can talk about. Taking a tourism tax is determined by the country. So the tourist will have to pay it. The same way we have to pay high tuition fees, and live in run down houses.