maldives news – Page 943 – Minivan News

Weekly state expenditure to be made public

The government will publicise details of weekly state expenditure starting from next month, President Mohamed Nasheed announced Monday night at the launching of the government’s “Fiscal and Economic Reform Programme.”

In his speech at the ceremony, President Nasheed stressed that “every single coin we get is the property of the Maldivian people and wealth created by Maldivian businessmen.”

“Along with a tax system, what we need the most is a transparent mechanism for expenditures,” he said. “For that mechanism to be perfect is essential for us to successfully implement the [taxation] system.”

At Monday night’s ceremony, captains of the tourism industry unreservedly endorsed the economic reform agenda, consisting of 18 pieces of legislation to introduce direct taxation, excise import duties, encourage private ownership of land and facilitate ease of doing business.

President Nasheed went on to say that details of government revenue and expenses should be clear to the public through independent institutions, such as the Auditor General, the Anti-Corruption Commission and parliament.

“It might be difficult for this government to instill this habit among us,” he continued. “However, it is absolutely necessary for governments to come and future generations. No ruler should consider anymore that assets of the Maldivian state belongs to him.”

On how proceeds from the new taxes are to be utilised, Nasheed reiterated the core pledges of the ruling Maldivian Democratic Party (MDP), which include providing affordable housing, lowering cost of living, establishing transport networks, ensuring universal health insurance and combating drug abuse and trafficking.

President Nasheed observed that taxation was introduced in other countries after “serious unrest, conflict between the public and businessmen and with some countries plunging into civil war.”

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Tourism magnates endorse proposed economic reforms

Prominent businessmen and magnates of the tourism industry endorsed the government’s economic reform agenda and introduction of direct taxation last night.

Speaking at a launching ceremony for the “Fiscal and Economic Reform Programme,” Mohamed Umar Manik, chairman of the Maldives Association of the Tourism Industry (MATI), observed that a sustainable source of government revenue was necessary for providing public goods and services.

“Today we have democracy in our country, but democracy can only be strengthened if we are able to deliver,” said the Chairman of Universal Enterprises. “To do this, our government must have sources of income. A detailed reform agenda has been proposed for this. In my view, it is an ideal reform programme.”

Manik congratulated President Mohamed Nasheed and “those who framed the reform agenda.”

Following consultation with the government over the proposed taxes, MATI said in a statement earlier this week that the absence of a taxation system in the country “similar to tax regimes successfully implemented in other countries” was a serious impediment to development and economic growth.

Old ways of thinking

Preceding the MATI chairman, Mohamed Waheed Deen, philanthropist and owner of Bandos Island Resort, argued in an impassioned speech that a taxation system was essential for democracy to deliver rising standards of living.

“This should have been done and finished 30, 40 or 50 years ago,” he said. “I sincerely thank our young President for beginning this effort today.”

A taxation system had to be introduced “because we are using the people’s property,” Deen contended.

“How can I say that I own Bandos?” he said. “It is not mine. It belongs to the Maldivian people.”

Taxation was the means for a more equitable distribution of wealth, Deen said: “Who wouldn’t want to send their child abroad for higher education? But can we facilitate it for them today?”

The government’s economic reform programme was necessary because “we do not want to keep the gap between rich and poor in this country anymore,” Deen asserted.

“What is the main reason a country becomes impoverished?” he asked. “I believe that one of the main reasons is refusal to tell the people the truth by many successive governments, many kings, until we have come to this point.”

In the Maldives’ long history, Deen continued, the public were indoctrinated to not criticise the government and given to understand that “only a particular group, from a particular family, could rule.”

Deen speculated that “the biggest challenge” the government’s economic reform agenda would face will be “changing people’s mentality.”

“This is the biggest problem facing our country today: [one side says] ‘everything is going right’ [while the other says] ‘nothing is going right,’” he explained. “So we have to educate our people, especially the councils.”

Deen also cautioned against unprincipled opposition to the government: “We could stay angry, hateful and disapproving and say ‘go on, run the government’ but sadly – remember this well – any harm this government suffers, the people will suffer many times over.”

Waheed Deen began his remarks by quoting the Quran 3:26: “O Allah. Lord of Power (And Rule), Thou giveth power to whom Thou please, and Thou strip off power from whom Thou please: Thou endow with honour whom Thou please, and Thou bringeth low whom Thou please: In Thy hand is all good. Verily, over all things Thou hast power.”

“Fruits of freedom”

MATI Secretary-General ‘Sim’ Ibrahim Mohamed meanwhile concurred that Maldivians could only “taste the fruits of political freedom” by liberalising and modernising the economy.

Following graduation from the ranks of the Least Developed Countries (LDCs), said Sim, the country could no longer rely on loans and foreign aid.

“In a fundamental sense, taxes are what the people give to the government they elected to manage their affairs,” he said.

Contrary to popular opinion, Sim continued, MATI had been advocating a taxation system as the organisation believed a sound fiscal policy was essential for “day-to-day planning of business matters as well as national affairs.”

In addition to fiscal responsibility, he added, new legislation and strengthening of the judicial system was also needed to foster investor confidence while stalled development of new resorts should be restarted to spur employment and private sector growth.

Sim concluded his remarks by appealing to “everyone who has to pay taxes, please pay taxes.”

“Bold initiative”

In his speech, Sunland Travels Director Hussain Hilmy reiterated that the Maldives’ “economic policy and legal framework needs to undergo modernisation and reform.”

“We in the business community welcome the bold initiative being undertaken by your administration to carry out a programme of comprehensive economic and fiscal reform,” Hilmy said.

He added that businesses were “delighted” with the government’s policy of a “shift away from import duties as a major source of government revenue.”

Hilmy observed that for successful tax administration, “transparency, accountability, predictability and effective combating of corruption” were necessary “preconditions.”

While the local tourism industry “has been the main engine of growth in the Maldivian economy for the last 40 years or so,” Hilmy warned that “tourism as we all know is an extremely volatile industry subject to sudden shocks and highly sensitive to fluctuations in global economic conditions.”

He suggested that a successful tax system should therefore “ensure the competitiveness of Maldivian tourism in the global market place.”

“We in the tourism industry also welcome your efforts to reduce public expenditure and wastage and create a more efficient and lean government,” he continued. “I can assure that lest there be any doubt that there is full confidence on the part of the tourism industry in the proposed reform programme and we have every confidence that this programme will be able to deliver the kind of success that we all wish and the kind of prosperity that we all are looking for.”

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UN Committee grills Maldives delegation on human rights commitment

A delegation from the Maldives headed by Attorney General Abdulla Muiz has reported to the UN Committee on the Elimination of Racial Discrimination, which will release its findings in early September.

According to a UN report summarising the meeting, the delegation was questioned on “restrictions on the practice of religion, the rights of migrant workers, human trafficking, the lack of anti-discrimination laws in the country, the role of the Human Rights Commission and the requirement that all members be Muslim, citizenship laws and the stipulation that non-Muslims could not become citizens nor could they openly practice their religion, the discrepancy in secondary school enrolment rates between boys and girls, and the interaction between English common law and Islam in the legal system of the Maldives.”

The committee noted that the government’s historical position had “been to deny the existence of racial discrimination in the country as the Maldives has a small homogeneous population, of the same origin, pursuing the same religion, and speaking the same language.”

However it had acknowledged that a substantial increase in migrant workers “requires legislative attention”, the UN committee noted.

“In the absence of prejudices leading to racial discrimination in the Maldives, the government did not take specific steps in terms of education and teaching, and culture and information, to address racial discrimination. However, the report says in the Maldives the teaching of Islam promotes understanding, tolerance and friendship among nations and all groups,” the committee noted.

The report was presented to the committee by Muiz, who emphasised the “enormous progress” the country had made in recent years towards guaranteeing “fundamental freedoms and individual liberties”.

He did, however, acknowledge the “enormous challenges” the Maldives faced in ensuring that those rights now protected by law were actually enjoyed in practice. In particular, the Maldives delegation identified these as including “fragile democratic fabric, infant democratic institutions, religious fundamentalism, heavy drug abuse, the vulnerability of the country to environmental threats and most recently, human trafficking.”

Furthermore, the delegation claimed, the country’s Human Rights Commission “was one of the most active national institutions in Asia” and “fully compliant with the Paris Principles”, apart from the requirement that all members of the Commission be Muslim.

“Maldivian law did not provide for freedom of religion, although in practice foreigners were allowed to practice religions other than Islam in private,” the delegation informed the committee.

Nonetheless, the Maldives was “a culturally diverse society” that protected its vulnerable migrant labour population by imposing duties on employers, “including responsibility for the employee during their stay and other requirements”, despite the absence of health and safety laws.

“The right to association and the right to strike were now guaranteed under the Maldives’ Constitution,” the delegation informed the committee.

It noted that while the Maldives did not have any laws prohibiting trafficking in persons “and no official studies or reports had been conducted”, the government had a “strong policy to prevent the country from becoming a safe haven for traffickers.”

“Muiz asked the Committee to bear in mind that the democratic and legal framework of the Maldives was a work-in-progress,” the committee noted.

Delegation confronted

In contrast to the Maldives’ position that racial discrimination did not exist, the committee observed that cases of hostility and ill-treatment of the country’s increasingly large number of migrant workers – half the country’s total workforce – had been reported.

“The Maldives should consider acceding to conventions concerned with the rights of non-citizens and amend relevant regulations to allow non-Muslims to acquire Maldivian citizenship,” the committee suggested, and noted that there was “still no anti-discrimination legislation” active in the Maldives.

“It is necessary for the State party to enact legislation on prohibition of incitement to national, racial or religious hatred,” the committee stated.

The committee observed that there was a lack of demographic information on the Maldives, given the extensive size of its foreign labour force, and that “it would be useful to investigate whether there are tensions between Maldivian citizens and foreign workers.”

“Restrictions on the rights of migrants and other foreigners to prohibit the practice of religions other than Islam, except in private, were of concern as well. Was any one Maldivian citizen married to an individual practicing a different religion?” one committee member asked.

Delegation defends

In response to the committee’s questioning, the Maldives delegation contended that the Maldives had “capacity constraints” and “relied on the support of international organisations”, in which case the committee noted “a report longer than three pages would have been appreciated.”

Regarding the committee’s questioning on freedom of religion, the delegation noted that the Maldives maintained a reservation to article 18 of the International Covenant on Civil and Political Rights on freedom of religion “and there were currently no plans to withdraw that reservation.

“This was a reflection of the deep societal belief that the Maldives always had been and wished to remain a 100 percent Muslim nation,” the delegation informed the committee, adding that “Muslims and non-Muslims lived harmoniously in the Maldives.”

“It was not true that under the new Constitution existing citizens could be arbitrarily deprived of their nationality if they were to stop practicing Islam. The Constitution was very clear on this point: no citizen could be deprived of his or her nationality under any circumstance. The Muslim-only clause under the citizenship article of the Constitution only applied to non-Maldivians wishing to become naturalised,” the committee reported.

The delegation acknowledged “increased reports of mistreatment of migrant workers by their employers”, but noted that the Maldives placed high importance on acceding to the eight core Conventions of the International Labor Organisation (ILO).

It also argued that “some of the rights and privileges enjoyed by foreign workers were even better that those enjoyed by Maldivians themselves”, such as those mandating the provision of food and accommodation for foreign workers.

“Foreign workers were not discriminated against in any way in the Maldives,” the delegation informed the committee.

In his concluding remarks, Muiz observed that the exercise of appearing before the committee “was tougher than even appearing before the parliament of the Maldives.”

Read the full summary

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Civil court orders police to pay MP Yameen Rf 244,000

The civil court has ordered police to pay Rf 244,000 (US$$15,823) in compensation to the former President’s half-brother and People’s Alliance (PA) leader Abdulla Yameen for unlawful detention on the Presidential Retreat of Aarah.

Yameen was arrested in June last year on charges of bribery and treason, alongside Jumhooree Party (JP) leader and ‘Burma’ Gasim Ibrahim.

However the Criminal Court at first refused to extend their detention beyond three days’ house arrest, claiming that there were no reasonable grounds to hold the MPs.

Yameen was subsequently taken into protective custody by the Maldives National Defence Force (MNDF) and held on the Presidential Retreat for 13 days.

The MNDF at the time claimed that Yameen had sought their protection after violent clashes between MDP supporters, police and another group outside his house on the evening of July 14. However Yameen claimed he refused the offer of protection and requested that security forces control the crowd outside his residence.

In August last year the Civil Court ruled that the government’s detention of Yameen was unconstitutional and declared that the MNDF had violated articles 41, 19, 21, 26, 30, 37, 45 and 46 of the constitution.

Explaining the decision to award Yameen compensation, Judge Aisha Shujoon said that the Supreme Court had at the time of Yameen’s detention determined that the arrest was unlawful.

Police had claimed that the case could not be filed against the police because the High Court had subsequently extended Yameen’s detention.

However, Judge Shujoon said that despite this ruling the Supreme Court had ruled that there were no judicial grounds to believe that Yameen was arrested in accordance with the law, and that therefore it was to be believed that the arrest was unlawful from the time he was arrested.

The Civil Court judge then ruled that Yameen’s detention from 29 June to 11 July was unlawful, and that Yameen had the right to be compensated for the 13 days and 20 minutes he was unlawfully held in detention.

Judge Shujoon said that considering respect for human dignity, detaining someone unlawfully could not be considered a minor offence.

She awarded Yameen Rf 1500 (US$972) for aggravated damage, Rf 41,600 (US$2697) for exemplary damages, and Rf 20,915.70 (US$1356) to reimburse Yameen for upgrading the security of his house.

The court also ordered police to pay the money within 30 days.

Maldivian Democratic Party (MDP) MP Mohamed Musthafa recently submitted a resolution to parliament calling for an investigation into allegations that Yameen as former head of the State Trading Organisation (STO) had been complicit in trading subsidised oil to the Burmese military junta on the black market.

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Jumhoory Party MP Muthalib resigns from party

MP Ibrahim Muthalib has resigned from the opposition-aligned Jumhoory Party (JP) led by MP ‘Burma’ Gasim Ibrahim claiming that his dreams of making JP the country’s third most active party had been “shattered due to lack of cooperation.”

“Nine months ago I joined the Jumhoory Party with the hope of making it the third most active party in the Maldives, because I felt that the Maldives was in need of a third party,’’ MP Muthalib today told Minivan News. “Currently only the ruling Maldivian Democratic Party (MDP) and the opposition Dhivehi Rayyithunge Party (DRP) are really heard, and no one says a word against them.’’

He said he was not originally invited to join the JP by Gasim, but joined the party on his own wish.

‘’I have worked nine months to accomplish this but it does not seem to be happening, so I thought it would be best to resign,’’ he said. ‘’The decisions we make are not implemented in the party and the JP really needs more time to stand on its own feet and walk.’’

Muthalib said he had not yet decided to join any other party for the moment.

‘’I resigned because I did not want to remain depressed with these thoughts. For now I just want to relax and remain independent for the time being,’’ he said, adding that he still believed that the Maldives was in need of an active third party other than the DRP or MDP.

Muthalib was elected to the parliament as an independent MP.

”I have officially informed the Elections Commission (EC) and the Speaker of the parliament about my resignation,” he said.

However, newspaper Haveeru quoted Muthalib as saying that his resignation came following Gasim’s vote in favor of the appointment of Dr Ibrahim Didi for Fisheries Minister and and Thalhath Ibrahim for Defense Minister.

Following Muthalib’s resignation, only two MPs of the Jumhoory Party will be left in parliament, Gasim and MP Ahmed Moosa.

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Luxury Indian cruise liner to set sail for Maldives in October

Indian shipping company AMET has announced that the cruise liner MV AMET Majesty will sail from Kochi to the Maldives starting October for a weekly four-night cruise intended to open the country to middle class Indian visitors.

“Only foreign cruise liners used to visit the ports that always remained the prerogative of the rich. With the rightly priced packages, AMET cruise brings cruise tourism options within the reach of the urban middle class,’’ AMET’s CEO Bharathi said.

The luxury cruise, equipped with dance floor, disco, casinos, show lounges, bars, swimming pool, barbeque and conference room is expected to be especially popular for weddings, the company said.

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Indian High Commission celebrates Independence Day

The Indian High Commission yesterday celebrated India’s 65th anniversary of Independence, with an event attended by a large number of people from the Indian community.

High Commissioner Dnyaneshwar M Mulay hoisted the national flag during a morning function, and read the Inidan President’s address to the nation.

Speaking after the address, Mulay recognised the contribution of the Indian community and the India Club in social welfare and cultural activities in the Maldives, and said he hoped that the recent establishment of the India Cultural Centre in Maldives would further increase the range of such activities.

Maldivian President Mohamed Naseed, Vice President Mohamed Waheed Hassan, members of Cabinet, members of the diplomatic corps and other prominent members of the Maldivian community attended an India’hosted Ifthar reception in the evening at the Nasandhura Palace Hotel.

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Quad-bike in Kuredu fatal accident was registered and driver licensed

The quad-bike involved in the crash on Kuredu Island Resort, which claimed the lives of British honeymooners Emma and Jonathan Gray, was legally registered to the resort as a tractor according to registration documents obtained by Minivan News today.

Maldivian Democratic Party (MDP) Chairperson ‘Reeko’ Moosa Manik had previously alleged during an emergency motion in parliament last week that the King Quad 700 vehicle was not legally registered with the Maldives Transport Authority, and that the driver, 23 year-old Swedish national Filip Eugen Petre, was not licensed to operate it.

Opposition MPs accused Manik of indulging a personal vendetta against the resort’s owner, Champa ‘Uchoo’ Mohamed Moosa, in retaliation for coverage by Champa’s private DhiTV station of an incident last year in which 168 bottles of alcohol were found in Manik’s car while he was outside the country.

Manik further alleged in parliament that attempts were made to “to hide the boy [Petre] and put the blame [for the accident] on a Maldivian employee in the resort.”

When Minivan News contacted Manik today, he maintained that he had been informed by a person working on the resort that the vehicle was unregistered. He also claimed that foreigners who wished to drive in the Maldives were required to register with the Ministry of Transport.

“I have been watching that island for a long time and they are doing a lot of illegal things,” he alleged. “I am bringing this up in the national interest, not because of Champa. I don’t want this to happen on another resort otherwise it will affect the industry.”

Following widespread media coverage of Manik’s claims in parliament Jonathan’s mother, Cath Davies, called for a full inquiry into the accident “as somebody, somewhere, is responsible for having allowed that quad to be on the island, and those keys to be available to the young man who was unlicensed and unregistered.”

According to registration papers obtained by Minivan News, the 172 kilogram Suzuki 2007 King Quad 700 4X4 was imported on May 5 2007 and registered on August 2 the same year.

Minivan News also obtained a copy of Petre’s Swedish category B driving license, which would in Sweden, the UK and many other European countries, legally allow the operation of a four-wheeled motorcycle as well as a car.

According to Police Inspector Mohamed Riyaz, who is leading the investigation into the Kuredu accident, under Maldivian law foreign nationals with a valid overseas license are also able to drive in the country for a period of up to 90 days without a local license.

Riyaz said police were in the process of determining whether the quad-bike had been appropriately registered. He confirmed that the vehicle had been registered as a tractor under the ‘C1′ category “used for vehicles transporting goods, not passengers.”

“If it had been properly registered it would be under the A1 category and the driver would require a motorcycle license, as it has a fuel engine and is a very powerful 700cc,” he said.

He also noted that the vehicle was not designed to carry passengers other than the driver, and carried a warning to that effect.

Filip Petre was seriously injured in the accident and remains in hospital in Male’, following the confiscation of his passport on the order of the Criminal Court. Inspector Riyaz said that an application for Petre to be taken abroad for further medical treatment three days ago had been declined, “as police believed that based on the medical report there was no imminent threat to his life.”

Inspector Riyaz said Petre’s family had approached the court to appeal the decision, and added that police were open to his treatment overseas if medical opinion was that urgent diagnosis was necessary.

In a statement to Minivan News, Filip’s father Lars Petre, a shareholder in the resort, described the accident as “by far the most tragic event in my life, and words cannot describe how saddened we are. I and my family are deeply concerned with errors on some of the media reports and we are also deeply saddened by some accusations made at my son.”

“My son Filip Petre (23 years) was taking the two guests home, to the other side of the island, when he experienced some difficulties with the bike, and crashed headlong into a tree on the road. The crash took two lives and badly injured my son.

“He fell unconscious with the crash and woke up some time later to find the two deceased also lying on the road. He immediately called for help and worked alongside with the doctor who arrived to try and save the victims of the crash, while he was bleeding himself.

“The quad bike which my son was driving was registered and my son Filip is licensed to drive such vehicles. My son Filip and his brother Tom (who was the first to arrive at the scene of the accident with the doctor), the management and staff of Kuredhu have been cooperating with the police investigation fully, and I give every assurance that they will continue to do so in the future.

“We understand the grief of the families who lost their loved ones in the accident, and we also respect the duty of the Maldives Police Service to investigate the matter. However the fact remains that what happened on August 6 is an accident, a very tragic fatal event, which my son no anyone else had the power to change.

“I wish to assure to the families of the deceased, the media and the public that there was absolutely no ill intention whatsoever in this accident. While my son and the staff of Kuredhu are shattered with the result of the accident, we remain helpless to change anything that has happened.

“The management of Kuredhu will do whatever is possible to corporate with the investigation and to avoid further distress for all families concerned.”

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“Taxation system long overdue,” says MATI

The Maldives Association of Tourism Industry (MATI) has declared its support for the government’s economic reform programme and the introduction of direct taxation.

In a press statement yesterday, the association of industry leaders noted that the absence of a taxation system in the country “similar to tax regimes successfully implemented in other countries” was a serious impediment to development and economic growth.

“The introduction of such a taxation system to the Maldives is long overdue,” MATI said in its statement.

As the enactment of direct taxation would increase state revenue and reduce government borrowing from banks, “this association believes that banks lending to private businesses will increase and job opportunities will be created.”

“This association believes that as a result of [the economic reforms], economic growth will quicken and challenges faced by the Maldives tourism industry will be solved,” the statement reads.

MATI warned that “it is certain” that if state revenue was not increased “with immediate effect” the domestic economy would be adversely affected.

Consultations

The statement of support from MATI comes after the Tourism Ministry last week condemned “misleading statements in the media” by the organisation about the government’s proposed economic reforms.

The Tourism Ministry claimed that “MATI’s misleading statements in various media recently about the tax bills of the government’s economic reform agenda imply that the government’s efforts were undertaken without consulting officials from the tourism industry.”

The Ministry said it had “consulted a number of parties active in the tourism sector and sought advice for shaping the tax bills so that it would not be a disproportionate burden on the industry.”

“After these consultations, the Ministry is assured that businesses in the tourism industry support the reform agenda. Likewise, those in the front ranks of the tourism industry as well as MATI support it. Therefore, [the ministry] regrets an organisation like MATI making statements that are contrary to the advice and suggestions of senior industry leaders.”

President Mohamed Nasheed has meanwhile welcomed MATI’s support for the government’s fiscal and economic reform plans.

“The President believes that the fact that MATI agreed to fully support the government in its economic reform programmes, after deliberations between MATI and the government, is a sign that they support the measures taken by the government to improve the state of the Maldivian economy and increase the state’s income,” reads a statement from the President’s Office today.

Recommendations

Following consultations with the government, MATI proposed a series of recommendations on the new taxes.

In its comments on the proposed legislation – obtained by Minivan News – MATI stressed the need to educate the public and ease in the taxes gradually.

“There is a need to study the effects of the combined burden of having to pay all these taxes on those affected,” the association noted.

On the introduction of a five percent General Goods and Services Tax, despite the successful introduction of a Tourism Goods and Services Tax (T-GST) in January this year, MATI noted that “T-GST was collected from a highly regulated sector of the economy. The same cannot be said of the other sectors of the economy or of the general public who would end up paying this tax.”

MATI argued that the GST could stoke inflationary pressures, urging “careful study of the effects of GST on the economy.”

“For the tourism industry – Costs of local purchases will go up by the GST amount or more. Direct imports will increase in order to avoid GST. Resorts will have to pay both T-GST & GST,” MATI noted. “Confusion will arise due to different rates being applied. In view of this it is suggested that eventually the two taxes should merge into one GST.”

The organisation also recommended delaying the introduction of a private income tax (PIT) to January 2013 to establish a regulatory framework and raise public awareness.

The organisation contended that the progressive income tax rates – from 3 percent to 15 percent for incomes above Rf30,000 (US$1,900) – were “especially targeted at the very rich.”

“Under the proposal, people earning one million rupees per year will pay about 2.8% of their income as PIT, whereas a person earning MRF10 Million per year will pay about 13.25% of the income as PIT,” it noted.

Moreover, MATI urged that plans to raise the current 3.5 percent T-GST to 6 percent in January 2012 and 10 percent in January 2013 be scrapped in favour of retaining the current rate until a recommended hike to 7 percent in January 2013.

“Tourism industry is already paying a lot to the Government and therefore, we urge the Government to give the industry a breathing space to help the industry revive from low occupancy, heavy operating costs and the economic chaos caused by recent financial crisis in Europe,” MATI said, cautioning against high taxes leading to the Maldives becoming “an even more expensive destination.”

MATI further noted that the taxes were “especially heavy on the tourism industry and will result in a very negative impact on the industry.”

“Tourism will cease to be an attractive industry to invest in. As a result, new investments will be slowed. Proposals to banks to borrow will not look that attractive any more. Bank lending to this sector will become more and more selective. This is not what we like to see in this country,” MATI stated. “Finally, should we continue to ‘milk the cow dry’? Certainly not is the answer.”

“Agreeable”

President Mohamed Nasheed responded to MATI’s recommendations in a letter yesterday, expressing the government’s gratitude for the comments.

“The purpose of these reforms are to set in place the foundation needed to build a strong and modern economy befitting the Maldives’ status as a middle-income country, and to enable the state to provide the necessary services that the people of this country expects,” the letter reads. “In addition to the tax reforms that will allow for a sustainable revenue base, the government’s programme include important reforms such as facilitating the ease of doing business and strengthening property rights.”

On the recommendations by MATI, the President’s letter noted that “the government is agreeable to reduce the proposed rate of tourist sector GST to become effective from January 2013 to 8 percent from the current proposed rate of 10 percent.”

The government was also “agreeable” to MATI’s proposals on capital allowance, pension payments and deducting interest payments from banks and other financial institutions in full, the President’s letter states.

On the impact of the taxes on the economy, the letter notes that “studies have shown that proposed tax rates are lower than those in other island economies and thus will not have an overbearing effect.”

Addressing skepticism of balancing the state budget with the new revenue sources, President Nasheed said that “the revenue impact on the proposed taxes will bring income up to a level where necessary expenditures can be met and lead to a balanced budget in 2015.”

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