MDP against “double taxation” of tourism industry

The opposition Maldivian Democratic Party (MDP) is against the government’s plans to reintroduce the tourism bed tax and hike the Tourism Goods and Services Tax (T-GST) from eight to 12 percent, parliamentary group leader Ibrahim Mohamed Solih has said.

“We won’t agree to double taxation in tourism industry,” he was quoted as saying by newspaper Haveeru.

Solih told local media that the MDP was also against raising import duties. A parliamentary group meeting will be held to decide the party’s stance on the government’s bills, he said.

An extraordinary sitting of parliament has meanwhile been scheduled for tomorrow – during the ongoing two-month recess – to debate government-sponsored legislation to raise the T-GST and amend the Tourism Act.

Amendments to the tourism law are intended to revive the discontinued flat US$8 bed tax and require resort lease extensions to be paid as a lump sum.

Following the Majlis’s failure to extend the tourism bed tax before the end of last year, Finance Minister Abdulla Jihad told local media that the resulting losses to state revenue would be MVR100 million a month.

Among other revenue raising measures proposed by the government include revising import duties, raising airport departure charge for foreign passengers from US$18 to US$25, leasing 12 islands for resort development, and introducing GST for telecommunication services.

In December, parliament passed a record MVR17.5 billion (US$1.16 billion) budget for 2014, prompting President Abdulla Yameen to call on the legislature to approve the revenue raising measures, which the government contends are necessary to finance development projects.


Revised 2014 budget stands at record MVR 17.5 billion

After several weeks of delay, the Ministry of Finance and Treasury has submitted a record budget of  MVR 17.5 billion (US$ 1.1 billion) with a projected deficit of 2.2 percent of GDP.

On October 30, former President Dr Mohamed Waheed Hassan’s administration proposed a budget of MVR 16.4 billion (US$ 1 billion), but with the election of President Abdulla Yameen, the Majlis asked the Finance Ministry to revise the budget to include the ruling Progressive Party of the Maldives’ (PPM) campaign pledges.

In his inauguration speech, Yameen warned the country’s economy was in “a deep pit” and pledged to reduce state expenditure. Local media reports quote Yameen saying he would cut expenditure by amounts varying between MVR 1 billion and 4 billion. Yameen reappointed Finance Minister Abdulla Jihad soon after assuming the presidency.

The rise in total expenditure from MVR 16,410,803,668 (US$ 1 billion) to MVR 17,532,761,744 (US$ 1.1 billion) is mainly due to a MVR 1,120,837,239 (US$ 72,687,239) increase in recurrent expenditure, which continues to account for over 73 percent of the state budget.

The revised revenue is forecast to be MVR 15,101,854,850 (US$ 979,368,019), a MVR 1,223,577,000 (US$ 78,940,452) increase from the initial forecast of MVR 13,878,277,850 (US$ 895,372,765).

The increased figure is to come from advance payments from resort lease extensions.

Former President Mohamed Nasheed had proposed the same measure for the 2012 budget, but when Nasheed’s government fell in February 2012, the Ministry of Tourism allowed resort operators to pay resort leases in installments. Nasheed’s Maldivian Democratic Party (MDP) said the decision had cost the government US$135 million.

The additional revenue raising measures include:

  • Hiking T-GST to 12 percent from 8 percent at present
  • Revising import duties
  • Delaying the abolition of the tourism bed tax for one more year
  • Raising airport departure charge for foreign passengers from US$18 to US$25
  • Leasing 12 islands for resort development
  • Introducing GST for telecommunication services (currently exempt from the tax)

Speaking at today’s Majlis Budget Committee, MDP Parliamentary Group Leader Ibrahim ‘Ibu’ Mohamed Solih said the MDP will support the government’s proposal to obtain lease extension fees upfront.

MDP MP Ilyas Labeeb noted the new revenue raising measures depended heavily on the tourism sector and proposed the committee meet with the Maldives Association of Tourism Industries (MATI) to get feedback on the impact proposals may have on the tourism sector.

The proposed revenue raising measures will provide the state with a total of  MVR 3,474,270,604 (US$ 224,146,491). However, the People’s Majlis will need to amend laws including revisions to tax laws and import tariffs to realise the expected revenue.

The projected budget deficit stands at 2.2 percent of the GDP or MVR886,622,881 (US$ 57,201,476). The new deficit shows a decrease of MVR 101,618,924 (6,556,059) from the initial deficit of MVR 988,241,805 (US$ 63,757,536).

The deficit is to be mainly financed through foreign loans. The government expects to obtain MVR 832,680,000 (US$ 53,721,290) from foreign parties for budget support.

Whilst the initial budget proposed financing MVR 690,601,517 (US$44,554,936) by selling T-bills, the revised budget has drastically reduced the figure to MVR 141,802,593 (US$ 9,148,554).

The Budget Committee is to meet with the state’s independent institutions on December 11, 12 and 14, and the MMA governor and Auditor General on December 11.

The committee will hold discussions on the budget of government offices on December 15, the Public Sector Investment Programme on December 16, and the revenue raising measures on December 18.

The committee’s report will be compiled on December 19 and 20 and the final report will be sent to People’s Majlis Speaker Abdulla Shahid on December 21.