Tag: Green Tax

Maldives’ resorts among world’s best, but industry insiders express concern over Green Tax

Three Maldivian resorts have been named among the world’s top 25 hotels by TripAdvisor, but industry specialists have expressed concern over the new green tax and rising prices.

Gili Lankanfushi Maldives placed top in the recently announced Traveler’s Choice Awards, based upon the quantity and quality of reviews posted on the website, while two other Maldivian resorts – Cocoa Island and Constance Moofushi – ranked at number six and fifteen, respectively.

The survey by the world’s largest travel website acknowledged over 8,100 properties based on one year’s worth of reviews and opinions from its 315 million unique monthly visitors.

“We are very glad that three of our resorts got included as top hotels in the world,” said Maldives Association of Tourism Industry Secretary General Ahmed Nazeer.

Four other Maldivian locations were named as part of the top 25 hotels in the Asian region. Baros Maldives was awarded ninth place on the regional list, Soneva Fushi placed 13th, while LUX* Maldives and Komandhoo Maldives Resort earned 21st and 22nd, respectively.

Meanwhile, industry specialists have expressed concern that the Maldives might soon become an overpriced destination due to increasing taxes and service charges, with the latest levy taking the form of a US$6 green tax.

“The green tax will definitely have an impact,” said Shafraz Fazley, Managing Director of Viluxur Holidays to ttgasia.com. “It is (already) becoming too expensive to go to top resorts because of all the service charges and taxes.”

The US$6 green tax was announced in November last year with the tourism minister Ahmed Adeeb saying that the revenue generated from the tax will go into managing waste from local resorts and other islands.

Rising arrivals, rising costs

The tax is part of  new revenue raising measures outlined in the record MVR24.3 billion (US$1.5 billion) state budget for 2015, which also includes the addition of ten resorts to the current 109 registered facilities. These measures are anticipated to raise MVR3.4 billion (US$220 million) in revenue for the government.

The green tax will be introduced 11 months after the abolition of the US$8 per night bed tax, and one year after the hike in the Tourism Goods and Service Tax (T-GST) from 8 to 12 percent. Airport service tax was also raised from US$18 to US$25 in July 2014 for visitors leaving the country.

Maldives Association for Travel Agents and Tour Operators President Abdulla Ghiyas was reported as having told TTG that the resort contracts will be unaffected as the bed tax had been taken into account, though the opposition has previously called the levying of this and T-GST simultaneously as “double taxation” on the industry.

“Have a look at the TripAdvisor Forum,” Michelle Flake from Koamas Luxury Escapes told TTG. “I am sure people are moaning and saying it will be too expensive for them to come soon.”

After receiving more than one million tourists for the second consecutive year in 2014, the tourism ministry estimates that the Maldives will see 1.4 million tourist arrivals this year.

Speaking to Minivan News about the past year, however, Tourism Employee’s Association of Maldives Secretary General Mauroof Zakir said that, despite the increased arrivals, the tourism industry suffered as a whole in 2014.

“Total tourist arrivals have increased compared to the previous year. However, as arrivals from Europe and Russia decrease, less income is generated as the replacing Chinese visitors spend less and stay for lesser periods,” said Zakir.

Last year’s Maldives visitor survey in January 2014 appeared to confirm Zakir’s point, showing that Asian tourists stayed for shorter periods of 3 to 4 days while the average stay for European tourists was between 7 and 11 days.

According to the Tourism Yearbook 2014 – published by the tourism ministry – average duration of stay by tourists is declining, from 8.6 days in 2009 to 6.3 days in 2013.

The Chinese and Russian tourist markets are two of the fastest growing in the world, with arrivals increasing by an average of 54 and 10.7 percent, respectively, between 2009 and 2013.

Adeeb has acknowledged the negative impact of the falling Russian rouble on arrivals, saying that the Maldives must diversify its tourism markets as the international arena “heats up”.


Related to this story

1.4 million figure for 2014 tourist arrivals incorrect, says Tourism Minister

US$6 green tax to be introduced from November 2015, says tourism minister

President Yameen announces development of five resorts in Haa Dhaalu Atoll

Government decides to implement a ‘green tax’ on tourists

Likes(1)Dislikes(0)

Majlis passes Green Tax

The People’s Majlis has today approved amendments to the Tourism Act, introducing a ‘Green Tax’ on all tourists.

The US$6 per person levy – part of the government’s plans to raise MVR3.4 billion (US$220 million) in new revenue next year – will be introduced in November.

Tabled last month by Progressive Party of Maldives MP Abdulla Khaleel, MP for Nilandhoo, the bill was passed with the support of 52 of the 68 MPs present during the today’s vote.

Tourism Minister Ahmed Adeeb has previously said that the cabinet does not believe the green tax will hinder the demand from tourists, who will become “champions” of the Maldivian environment by paying the tax. He added that revenue generated would be spent on resolving the waste management issues in the greater Malé region.

The introduction of the new tax is to come 11 months after the abolition of the bed-tax, which will continue to be charged at US$8 a night until the end of this month.

A recent increase in Tourism Goods and Service Tax prompted some within the tourism industry to suggest the resorts could not withstand further taxation, although the IMF has continued to push for further levies in order to relieve the country’s fiscal imbalances.

Likes(0)Dislikes(0)

Government submits revenue raising bills to parliament

The government has submitted two bills to parliament for introducing a green tax and revising import duties to raise additional revenue anticipated in the 2015 state budget.

The President’s Office explained in a press statement on Thursday (November 13) that the government submitted amendments to the Tourism Act to introduce a US$6 per day ‘green tax’ on tourist establishments with the exception of guesthouses.

“The government decided to introduce this tax, as the Maldives is a tourist destination and the lack of a safe waste management system is adversely affecting tourism industry, to pave the way for the establishment of an adequate environment-friendly waste management system, to make Maldivian tourism an environment-friendly industry, and to provide an environment-friendly service to tourists,” the statement read.

The amendment also specifies the powers of the Maldives Inland Revenue Authority to collect the green tax, the statement added.

Tourism Minister Ahmed Adeeb told the press last week that the green tax would be levied in November 2015 – 11 months after the abolition of the bed-tax, which will continue to be charged at US$8 a night until the end of this month.

Adeeb insisted that the green tax would not hinder the demand from tourists – especially from Europe – who would become “champions” of the Maldivian environment by paying the tax.

While some resort owners have suggested that the combination of the bed tax with the rise in Tourism Goods and Services Tax (T-GST) to 12 percent this month has affected bookings, Adeeb vowed there would be no further hikes in T-GST during the current administration’s five-year term.

Opposition MPs have meanwhile sought assurances from the government that proceeds from the green tax would be used to finance environmentally sustainable infrastructure projects such as sewerage and coastal protection in the islands and not for the state’s wage bill.

In his budget speech to parliament earlier this month, Finance Minister Abdulla Jihad noted that MVR3.4 billion (US$220million) was forecast from new revenue raising measures, which also includes acquisition fees from investments to special economic zones (SEZs), income from the home ownership programme, and leasing 10 islands for resort development.

Import duties

The government also submitted amendments to the Export-Import Act to revise customs duties or tariffs to reflect “changes in the price of import goods in the global market,” the President’s Office stated.

The latest monthly economic review from the Maldives Monetary Authority noted that “the International Monetary Fund (IMF) commodity price index fell in both monthly and annual terms in September 2014, by 4 percent and 9 percent, respectively.”

“The monthly and annual decline in commodity prices was attributed to the decline in petroleum, metal and food prices. The price of crude oil fell by 4 percent in monthly terms and by 12 percent in annual terms and stood at US$95.9 per barrel at the end of September 2014,” the review stated.

In April, parliament approved import duty hikes for a range of goods proposed by the government as a revenue raising measure.

Jihad meanwhile told the budget committee last week that the government was considering increasing custom duties “mostly for luxury items, or items that are harmful to the environment or health.”

The cabinet’s economic council has not yet finalised the import duty or tariff revisions, Jihad noted, though he did reveal that the items under consideration include tobacco, perfume, and vehicles.

Tariffs for tobacco would be raised from the current 150 percent to 300 percent, 100 to 150 percent for cars, and zero to 10 percent for perfume, Jihad said.

Asked if higher custom duties would lead to higher prices, Jihad said the impact on the inflation rate would have to be studied for a proper assessment, which would take time to complete.

At parliament’s budget debate last week, Maldivian Democratic Party (MDP) MP Eva Abdulla criticised the proposed import duty hikes, noting that the government has decided to waive tariffs for construction material or capital goods for new resorts with development stalled due to financial constraints.

The burden of higher prices of goods due to higher custom duties would be borne by the public, she argued.

Eva noted that Jihad told the budget committee of plans to increase import duty for foodstuff and petroleum products.

“Our question is why shouldn’t an income tax be introduced? When MDP submitted an income tax bill to parliament it wasn’t passed. But we are telling this government to introduce an tax and [tax] the affluent as well,” she said.

Likes(0)Dislikes(0)

MPs quiz finance minister about revenue raising measures

MPs on the budget review committee quizzed Finance Minister Abdulla Jihad yesterday about revenue raising measures proposed within the record MVR24.3 billion (US$1.5 billion) state budget for 2015.

Briefing the committee yesterday (November 10), Jihad explained that MVR3.4 billion (US$220 million) in additional revenue is anticipated from raising import duty rates from July onward and introducing a ‘green tax’ for tourists.

Additionally, acquisition fees from investments to special economic zones (SEZs), income from the home ownership programme, and leasing 10 islands for resort development would help raise the forecast revenue.

The minister also told the committee that domestic debt had reached about MVR20 billion (US$1.2 billion)- 39 percent of GDP -making the rolling over of T-bills “a nightmare”.

The government was considering increasing custom duties “mostly for luxury items, or items that are harmful to the environment or health,” he said.

The cabinet’s economic council has not yet finalised the import duty or tariff revisions, Jihad noted, though he did reveal that the items under consideration include tobacco, perfume, and vehicles.

Tariffs for tobacco would be raised from the current 150 percent to 300 percent while duty would be raised from 100 to 150 percent for cars, and zero to 10 percent for perfume, Jihad said.

Asked if higher custom duties would lead to higher prices, Jihad said the impact on the inflation rate would have to be studied, which would take time to complete.

Jihad stressed that the government has ceased deficit monetisation – borrowing money from the central bank to finance the deficit – in May, as a result of which the inflation rate was reduced to 1.4 percent.

In April, parliament approved import duty hikes for a range of goods proposed by the government as a revenue raising measure.

Meanwhile, the forecast for income from SEZ acquisition fees is US$100 million, Jihad revealed, which is expected by August 2015.

A further MVR400 million (US$25.9 million) is forecast from leasing and sale of land from across the country, Jihad said – in particular, plots from unused reclaimed land in various islands.

The state-owned land designated for leasing or sale falls under three categories, he explained, which were residential, commercial, and industrial.

Moreover, 10 new islands would be leased next year for resort development, he continued, which would generate income for the government in the form of acquisition costs.

As an incentive or relief for new resorts with development stalled due to financial constraints, Jihad said the government would waive import duties for construction material or capital goods next year.

Tourism Minister Ahmed Adeeb revealed yesterday that a green tax of US$6 per night would be introduced in November 2015 and guest houses would be exempt from the tax.

Jihad said the income from the green tax would be used for water, sewerage, and coastal protection projects.

Of the proposed revenue raising measures, import duty revisions and introduction of a green tax would be subject to parliamentary approval, which the finance minister hoped would be granted as the budget was passed.

Legislative compromises to new revenue measures led Jihad to express fears in August that the predicted state deficit for 2014 would more than double in 2014.

State debt

The outstanding stock of treasury bills (T-bills) is currently MVR10 billion (US$648.5 million), said the finance minister.

In his budget speech last week, Jihad observed that the state’s debt would reach MVR31 billion (US$2 billion) or 67 percent of GDP by the end of 2014.

Expenditure on state employees in 2014 would reach MVR15.8 billion (US$1 billion), Jihad observed, while MVR3.2 billion (US$207 million) would have been spent on subsidies and social security benefits.

Consequently, the government was facing serious difficulties in “managing the state’s cash flow and financing the budget” as well as securing loans for budget support, Jihad said.

According to the central bank, the total outstanding stock of government securities was MVR13.6 billion (US$881 million) at the end of September.

Spiralling debt is threatening “the economy’s health”, Jihad said yesterday, with the rolling over T-bills proving to be difficult as the ministry has to plead with banks for extension of repayment periods.

“For example, if MVR600 million matures this week and there is MVR700 million in the public bank account, if the MVR600 million is rolled over there’ll be MVR100 million. How can we run the state with that? It can’t be done,” he explained.

The solution was raising additional revenue by utilising resources such as uninhabited islands, he continued, and appealed for cooperation from parliament. Additionally, the government was trying to extend the periods for repayment of debt.

The interest rate for T-bills is currently 7.5 percent, Jihad said, down from 10 percent before the current administration took office.

“This year we estimate that MVR1.2 billion worth of T-bills have been used by the state for finances. In 2015, it will be MVR440 million,” he noted.

Likes(0)Dislikes(0)

US$6 green tax to be introduced from November 2015, says tourism minister

The new green tax for tourists will be introduced from November 2015 at a rate of US$6 per bed per night, Minister of Tourism Ahmed Adeeb has revealed.

Speaking at a press conference held by the cabinet’s Economic Council today, Abeeb said that guest houses would be exempt from paying the new tax in order to reduce the impact on small and medium businesses.

“Since 2013 the guest house venture has been on the rise. We do not want to hinder the development of these businesses so we have decided to exempt guest houses from paying the tax,” said Adeeb, addressing concerns raised by the opposition Maldivian Democratic Party (MDP) earlier in the day.

The introduction of the new tax is to come 11 months after the abolition of the bed-tax, which will continue to be charged at US$8 a night until the end of this month.

Some resort owners have suggested that the combination of the bed tax with the rise in T-GST to 12 percent this month has affected bookings, though Adeeb today vowed there would be no further increases in T-GST during the government’s current term.

The T-GST rise came after urging from the IMF, which has suggested that the previous rate of 8 percent was low for a tourism industry as profitable as the Maldives’.

Adeeb said today that the council does not believe the green tax will hinder the demand from tourists – especially from Europe – who will become “champions” of the Maldivian environment by paying the tax.

2013 saw a record 1.3 million tourists spend just over  7 million bed nights in the country, although the country’s macro economic stability has remained a concern.

The tourism minister has previously said that revenue generated from the new levy would be spent on resolving the waste management issues in the greater Malé region – an issue made more pressing with the Economic Council’s recent termination of the Tatwa waste management contract.

Adeeb also revealed the council’s plans to remove import duty on construction material needed for the refurbishment of resorts, thereby stimulating resort development which he said would provide numerous employment opportunities for the youth.

President Abdulla Yameen last week announced that five new resorts would begin construction in 2015 in the northern atoll of Haa Dhaalu, which currently has none in operation.

Also speaking at the press conference, Minister at the President’s Office Mohamed Hussain Shareef said  the government was seeking to begin the re-development of Ibrahim Nasir International Airport midway through next year.

“Beijing Urban Group and Maldives Airports Corporation Limited has finished the drawings of the airport and are in the process of submitting the proposal to China’s Exim bank in order to finance the project,” explained Shareef.

Shareef also re-iterated the government’s plans to start work on the proposed Malé-Hulhulé bridge in the year 2015, before opening the bridge in 2017.

“The bridge survey team is almost done with the feasibility study and it will be submitting its reports to the Chinese Government who will then finance the bridge through grant-aid and low interest loans,” said Shareef.

Agreements to develop the INIA and to promote the Malé-Hulhulé bridge were signed during Chinese President Xi Jinping’s visit to the Maldives as part of his South-Asian tour in September.

During his visit, President Xi also officially requested that the Maldives participate in China’s 21st Century Maritime Silk Route, before journeying to India as part of his tour of the region.

Shareef concluded the press conference by commenting on what the governing Progressive Party of Maldives has described as attempts by the opposition to spread misinformation regarding comments made by the foreign minister on Sino-Indian discussions about the silk road project.

After Dunya Maumoon’s comments to the Majlis last week appeared to suggest that Indian had discussed joining the project with President Xi, the Indian government released a statement strongly denying such talks had occurred.

Shareef warned the MDP – which has today announced its intention to table a no-confidence motion against the foreign minister – that it would have to answer to the international community which had been informed of its attempts to sow discord.

Likes(3)Dislikes(5)

Government decides to implement a ‘green tax’ on tourists

Tourism minister Ahmed Adeeb has told local media that a bill detailing proposed ‘green tax’ for tourists will be sent to parliament this month.

“Levying this tax is necessary given Maldives’ fragile environment. Revenue generated from the tax will go into managing the waste from local resorts and other islands,” said Adeeb who also serves as the co- chair in the cabinet’s Economic Council.

The exact percentage to be levied will be decided after consultations with relevant stakeholders, he added.

Earlier this month, Adeeb said he would aim to resolve waste management issues within the next two years using state-owned companies, after announcing the termination of the deal with India based Tatva Global Renewable Energy.

Minister of Finance and Treasury Abdulla Jihad also spoke of the proposed green tax while submitting a record MVR24.3 billion (US$1.5 billion) state budget for parliamentary approval today.

Jihad noted that the tax will form part of revenue raising measures, which also include the addition of ten resorts to the current 112. The proposed changes are anticipated to raise MVR3.4 billion (US$220 million) in new revenue.

Levies on the tourism industry – which accounts indirectly for up to 90 percent of the country’s GDP – formed a major part of proposed revenue raising measures in 2014.

An IMF-recommended hike on Tourism Goods and Service Tax (T-GST) from eight to 12 percent was approved by parliament in February and came into force last Saturday (November 1), prompting concerns from industry insiders.

Speaking to Minivan News today, former Managing Director of Maldives Tourism Development Corporation (MTDC) Mohamed Matheen said that the budget issues could not be resolved without addressing the structural issues within the budget.

“The budget deficit cannot be resolved regardless of how the tax regime is set without addressing issues like the high recurrent expenditures of the government, which is a lot higher than the majority of the countries,” said Matheen.

One general manager from a prominent resort told Minivan News last weekend that bookings appeared to be down for November, with both guests and operators aware of the “double tax” as the T-GST increase combines with the bed tax – a measure also continued this year as a way to boost government coffers.

“November will be tough,” he explained. “Top end resorts will really feel this. There’s no way further increases could be stood.”

He also expressed concern that the resorts were being asked to carry the fiscal burden of the government’s failure to curb expenditure.

Former President Mohamed Nasheed has also criticised the hike in the T-GST saying that it would cause immense difficulties to the general public.

“Now a [ticket] to a flight to Addu has gotten more expensive than a flight to Colombo. This is not, in any situation, how it should be priced,” Nasheed told local media.

Likes(0)Dislikes(0)