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.
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.
“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.