Tag: MIRA

European decline could stall tourism in 2013: MATI

As the economies of America and the European Union (EU) become more vulnerable in the coming years, the Maldives tourism industry will see a decline in business, the Maldives Association of Tourism Industry (MATI) has predicted.

Maldives Association of Tourism Industry (MATI) yesterday claimed that decline in European traffic to the Maldives was due to economic stability in that region.

MATI Secretary General ‘Sim’ Ibrahim Mohamed pointed out that total tourist arrivals has not declined; in 2011, the Maldives set a new record of nearly one million.

“Occupancy rates in resorts have gone up following the arrival of Chinese tourists,” Sim told local media. “But the number of tourists arriving from Europe and other western countries has declined and we are threatened by the economic instability that Europe is experiencing.”

Maldives Inland Revenue Authority (MIRA) has lately released data indicating that tourism comprised a majority of state revenue in 2011. The State Budget for 2012 was created on this assumption, and leans heavily on expected revenue from tourism in the coming year.

Although the tourism industry has recovered impressively from devastating Boxing Day tsunami of 2004, Sim predicted progress would stall mid-2013 due to “global economic changes as economies of countries like America and the European Union become more unstable and vulnerable.”

However, the Maldives promises to remain atop its niche market of small island tourism. While Mauritius and the Seychelles are leading competitors, Sim affirmed that within the small island niche “we are unbeatable, and I believe it will stay that way.”

According to Simon Hawkins of the Maldives Marketing and PR Corporation (MMPRC), close correlation between a tourism industry’s marketing and arrivals is a strong indicator of success.

In 2011, Hawkins said, the Maldives destination board spent US$2 million on marketing and received close to one million tourists.

Comparatively, Mauritius spent US$13 million and received one million tourists.

“We’re six-and-a-half times more cost effective than Mauritius, and 30 times more cost effective than Indonesia,” said Hawkins. “We are batting very much above our weight, but that’s because the product is brilliant.”

Sim added that the Maldives product did not need to be reinvented during the European recession to suit the growing Asian market.

“Chinese tourists are like any Western tourist,” he explained. “When the Russians began coming to the Maldives they had some different expectations, but now they are used to what we offer. The Chinese will be the same.”

In 2011, Chinese tourists comprised a majority of total arrivals. However Minivan understands from conversations with resorts managers that while they come in high numbers they are not generally high spenders – while resorts make a bulk of their revenue from the bars, restaurants and spas, officials have noted that Chinese tourists’ primary expenditures are on board and transportation.

Minivan News inquired whether the 2013 presidential election would impact tourism.

“Political parties have matured, and the people have matured. They are accepting democracy,” Sim said. “2013 will be much better than when we started our multi-party system in 2008.

“Democracy is not a beauty pageant, it has ups and downs and hustle and bustle, and I think people understand that,” he observed.

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State revenue increased 89 percent in 2011

The Maldivian State received Rf4.5 billion (US$290 million) in revenue last year through the Maldives Inland Revenue Authority (MIRA).

Revenue in 2011 increased by 89 percent compared to 2010’s revenue of Rf2.4 billion (US$155 million).

According to MIRA statistics, most revenue was received from the tourism industry.

Within the industry, resorts pay Rf752 million (US$48 million) as tourism tax, Rf666 million (US$43 million) as Tourism Goods and Services tax (T-GST) and Rf511 million (US$33 million) to extend a resort lease, Haveeru reports.

Airport Service Charge (ASC) raked in the second-highest revnue at Rf337 million (US$21 million).

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First GST earnings at Rf43 million

The Maldives Inland Revenue Authority (MIRA) has released figures showing that the first round of income received as Goods and Services Tax (GST) reached Rf43 million (US$3 million), while the state earned a total of Rf312.8 million in November.

This is a five percent increase compared to October, during which a total of Rf298 million was collected in taxes, rent and fees.

Tourism Goods and Services Tax (T-GST) accounted for the largest income received (Rf81.8 million) while the Tourism Tax came in second with Rf73 million.

Total state income stands at Rf4 billion for the year so far (US$259 million), according to MIRA.

Presenting the 2012 budget to parliament in November, Finance Minister Ahmed Inaz predicted that altogether, government income was expected to reach a record Rf9 billion (US$583 million) this year.

Total expenditure out of the 2012 state budget is estimated to be Rf14.6 billion (US$946.8 million), an 18 percent increase from 2011. However the Inaz highlighted that recurrent expenditure was in line with income for the first time in many years, and the deficit was expected to drop to single figures.

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MIRA collects Rf298 million in October

The Maldives Inland Revenue Authority (MIRA) collected a total of Rf298 million (US$19 million) in taxes, rent and fees for October.

With Rf66 million and Rf58 million respectively, tourism goods and services tax (T-GST) and tourism tax accounted for the largest revenue sources.

A total of Rf61 million was received as tourism lease rent or land rent while US$15 million was collected in dollar receipts.

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New Rf500 notes enter circulation

New Rf500 notes will be introduced into national circulation today, Maldives Inland Revenue Authority (MIRA) has announced.

The new note bears the signature of Governor Fazeel Najib of Maldives Monetary Authority (MMA). The signature and a date change are the only changes to the Rf500 note, Haveeru reports.

The new notes are dated December 29, 2008; Muharram 1, 1430.

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High Court denies request for injunction to halt GST implementation

The High Court today denied a request by the Maldives National Chamber of Commerce and Industry (MNCCI) to grant a temporary injunction to halt the enactment of the Goods and Services Tax (GST) Act pending a court ruling on the constitutionality of contested provisions in the legislation.

Presiding Judge Abdul Gani Mohamed noted that the MNCCI filed the case late afternoon on Thursday, September 29, and that the GST law was in effect when the court reopened after the weekend. Following a preliminary hearing, the case was registered at the High Court on October 5.

If the court were to rule against MNCCI after granting a temporary injunction, the judge continued, it would not be possible to charge GST for goods sold in the intervening period.

Moreover, as article 65 of the Act states that the Tourism Goods and Service Tax (T-GST) Act would be repealed and replaced by the GST Act, the state would have to stop collecting T-GST from the tourism industry if the High Court issued the injunction.

Judge Abdul Gani said the claimant was unable to establish that irreversible damage would be caused to businesses if the injunction was not granted.

A majority of the five-judge panel therefore decided that there were no legal grounds to issue a temporary injunction to halt the enactment of the GST Act. In addition to Judge Abdul Gani, the panel consisted of Chief Judge Ahmed Shareef, Judge Dr Ezmiralda Zahir, Judge Abdul Raoof Ibrahim and Judge Abbas Shareef.

Legal challenge

At the first hearing of the case last week, lawyer Ali Hussein representing the Chamber of Commerce argued that article 51 of the GST Act – dealing with registration at the Maldives Inland Revenue Authority (MIRA) within a one-month period from the commencement of the Act – conflicted with articles 17 (non-discrimination) and 20 (equality before the law) of the constitution.

Ali Hussein contended that setting a threshold for registration – taxable supplies of the business over the course of 12 months must exceed Rf1 million – conflicted with the constitutional provision on “equal protection and equal benefit of the law.”

As a result of the threshold, said Ali Hussein, smaller shops would not charge GST while larger stores would do so for the same items.

The MNCCI therefore requested the High Court to strike down article 51 of the GST Act on the grounds that it was unconstitutional.

Moreover, it was argued that the one-month registration period provided in article 64 was too short and inadequate for businesses to prepare.

The third and last point of contention involved regulations drafted by MIRA under the Act not exempting semi-mature coconuts from GST despite different types of coconut being exempted under the Act.

Addressing the legal points raised by the MNCCI, State Attorney Moosa Alim referred to the concept of vertical equity in tax collection, whereby taxes paid increase with income.

Alim noted that article 17(b) of the constitution states that, “Special assistance or protection to disadvantaged individuals or groups, or to groups requiring special social assistance, as provided in law shall not be deemed to be discrimination.”

The length of the period for registration or glitches in implementation were not sufficient grounds to abolish the law, he said.

On the contention that the introduction of GST on top of custom duties amounted to double taxation, the state attorney submitted a list of 112 countries that charge import duties or tariffs in addition to Value Added Taxes (VATs).

MIRA’s Director General of Tax Planning Aiman Ibrahim explained that double taxation technically referred to the imposition of two or more taxes on the same income, property or financial transaction.

Businesses that paid GST on commodities purchased from wholesale traders or importers would have that amount deducted from their tax returns, he added.

Ali Hussein however contended that both import duties and the GST would be passed down to customers, who would be paying two taxes for the same item.

Asked by the Chief Judge whether a small business not eligible for GST registration could sell a taxable item without charging the tax, Aiman Ibrahim from MIRA replied yes.

Speaking on behalf of the MNCCI, the organisation’s Treasurer Ahmed Adheeb insisted that the Maldivian economy could not be compared to large economies such as Singapore or New Zealand.

“I know of nowhere in the world where GST has been implemented within a month,” he said, arguing that the cost of implementing the tax, in terms of monitoring and auditing tax returns, was prohibitive and outweighed the benefits.

Moreover, said Adheeb, there was no audit law in the Maldives and “only three licensed auditors.”

“We foresee serious problems that will eventually reach court as a result of [GST implementation],” he said.

In response, Aiman said there was “no connection between GST and audit licensing” as businesses would not be required to file audited reports for GST returns. “[The tax return] will be a single page document and MIRA will do the auditing,” he said.

Adjourning today’s hearing, Judge Abdul Gani observed that the legal points raised by were “very technical” in nature and offered both sides an opportunity to make a presentation on the technical issues involved in the case at the next court date.

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September incomes topple August

Maldives Inland Revenue Authority (MIRA) has released figures showing that the state earned Rf269.6 million more in September than in August, when income was reported at Rf260.7 million.

Altogether, MIRA collected more than Rf500 million (US$32 million) as income through September.

Resort rents accounted for the largest amount of income received (Rf196.4 million). Tourism Goods and Services Tax (T-GST) came in at Rf71.9 million.

Nearly half of the state’s dollar income which goes through MIRA comes from tourism rent payments (US$12.8 million).

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MIRA to conduct nationwide campaign to raise awareness on GST

The Maldives Inland Revenue Authority (MIRA) has decided to conduct a nationwide campaign to raise public awareness of the newly-introduced General Goods and Services Tax (G-GST).

Sun Online reported that 13 teams from MIRA would be visiting 20 atolls in the coming days to inform the public and help businesses register with the tax collection authority.

The Maldives National Chamber of Commerce and Industries (MNCCI) meanwhile filed a case at the High Court last week seeking a temporary injunction to halt the implementation of the GST Act. The group of businessmen argue that a number of provisions in the Act were unconstitutional.

However the High Court informed the appellants to correct errors in their case forms and re-submit it. The first hearing is likely to take place next week.

Read the MIRA FAQ on GST here.

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“Democratisation has its costs”: Maldives comes to terms with tax reform

The Maldives is coming to terms with a reformed tax system, following the introduction of a General Goods and Services tax this week.

Finance Minister Ahmed Inaz said the new system, which has raised the eyebrows of businesses, consumers and politicians alike, is a natural consequence of recent political changes and requires everyone’s support to function sufficiently.

“I think anybody could see that after the 2005 democratic reform, costs increased. These costs had to be met by additional revenue, but they weren’t,” he said.

Currently, the Maldives’ has a state deficit of Rf1.3 billion (US$85 million). Since democratisation, the Maldivian government has surpassed other national governments’ employment rates by employing 10 percent of the national work force. One third of government spending goes to state employees, and nearly half of the 2011 budget was spent on salaries and allowances.

The Goods and Services Tax (GST), which became operative on October 2, has raised a 3.5 percent tax on certain items. Contrary to an earlier tax which was paid for at the point of import and effectively invisible to the customer, the GST requires most businesses to charge an additional 3.5 percent directly to the customer at point of sale.

Certain items are tax exempt, a detail which has allegedly made it difficult to implement at stores selling a variety of products.

Inaz is optimistic that new tax reform system will cut costs and improve business operations. He said many businesses are compliant with the new measures, and are trying “their level best to be sure that this happens.”

“Business owners will have to crunch the numbers, and that will show them more about what is happening in their businesses. They will be able to better see how things operate.”

The GST is part of a larger tax reform system described in “a package of policy reforms that will help stabilise and strengthen the Maldives’ economy” agreed to by the Maldives and the International Monetary Fund (IMF) in May.

The policy reforms include raising the Tourism Goods and Services Tax (TGST) from 3.5 percent to 6 percent from January 2012, and to 10 percent in January 2013. Tourism is one of the Maldives’ leading economic contributors.

Inaz stressed that the tax was a step towards self-sufficiency for the Maldives.

“The international community will not give us the money required to balance our deficit, it is us who have to raise that money and that’s everyone’s responsibility. We have to make sure we can stand on our own feet.”

Meanwhile, opposition party Dhivehi Rayyithunge (DRP) has expressed concern over the tax. After supporting its initial pass through Parliament, DRP released a booklet titled “DRP’s response to the government’s economic nuisance package.” The booklet said businesses were not sufficiently prepared for the transition, and requested a six month delay.

Noting “administrative confusion” and the country’s heavy reliance on imports, the DRP also suggested levying a customs duty at the entry point to the country as a more effective means of raising revenue.

“We believe the GST is a regressive expense. The government doesn’t have the infrastructure to support it, implementation of GST means it will have hire a lot of people.”

DRP Spokesperson Ibrahim ‘Mavota’ Shareef said today that the tax system had not been implemented prematurely, but that it would only benefit large businesses while harming smaller ones.

“The government is doing the opposite of what it preaches,” he said. “Our main problem with the bill is that the government has decreased the tax burden on the very rich, especially in the tourism sector. We want to see the current tax system overhauled and replaced with a modern one.”

Shareef said DRP supports other progressive taxes, and was in favor of the recently announced plan to decrease import duties starting in January 2012.

President Mohamed Nasheed yesterday said a policy to reduce import duties would bring prices down starting early next year.

The President’s Office Press Secretary Mohamed Zuhair told Minivan News that the waiving of certain import duties would be significant.

“Once the new tax system is fully operating, all will fall into place. Prices will drop to even lower than originally,” Zuhair said.

A bill to finalise the tax system is currently before the Majlis, and is expected to take another two or three months to be properly processed.

During the President’s tour of retail, grocery, and supermarket stores on October 3, Zuhair said that operations were “running smoothly”.

“The only issue was that many businesses had a shortage of coins. Maldivians have a habit of rounding up to avoid coin transfers, but in a successful economy coins are important. Maldives Inland Revenue Authority (MIRA) has been doing a commendatory job in distributing coins, and the Maldives Monetary Authority (MMA) foresaw the issue and has a distribution system in place,” he said.

When asked about the DRP’s opposition to the GST, Zuhair alleged that the party’s motives were political.

“They made their case to the President, but the President was advised by his advisors and economic experts that a taxation system needed to be implemented,” said Zuhair.

“It is true that the very rich have not been taxed appropriately as per their earnings,” he acknowledged. “Once the tax system is fully in place, things should stabilise.”

Shareef did not accept that there were political motivations behind the DRP’s objections. “It’s an economic and social issue, concerning the distribution of wealth,” he said.

Inaz did not wish to comment on the matter. “This is an economic issue,” he said.

State Minister for Finance Ahmed Assad previously observed that even with the new taxes proposed by the government, the Maldives still had the most generous tax system in the region – even compared with other island nations, and neighbouring countries such as India and Sri Lanka.

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