MIRA to collect additional MVR110 million from telecoms tax

The Maldives Inland Revenue Authority (MIRA) expects to collect an additional MVR110 million (US$7.1 million) per year from taxes on the the telecommunications sector.

MIRA announced this week that telecommunications services will be subject to Goods and Services Tax (GST) – currently at 6 percent – from May 1.

The move comes as the government continues to introduce new revenue raising measure to address the MVR3.4 billion (US$224 million) shortfall in this year’s record MVR17.95 billion budget.

On Monday (April 14), the People’s Majlis is set to consider amendments to the Import-Export Act which propose raising custom duties on a number of items from the current zero rate to five, 10, and 15 percent or higher.

The items include diesel, sugar, sweets, cotton, rope, carpets, textiles, fur, man-made filaments, ready-made garments, and steel.

This week has also seen MIRA release its March revenue figures, which show an increase of 22 percent compared with the same month last year.

March’s figures were distorted, however, after after February’s GST payment date was extended into March as the deadline fell during a holiday.

The figures show that 54.8 percent of revenue came from GST, which includes Tourism Goods and Services Tax (T-GST) – scheduled to rise from the current 8 to 12 percent in November this year.

Last month’s figures showed a marked improvement on the previous month’s collections after the Majlis’ failure to renew the tourism bed tax in December had resulted in reduced earnings during January (reflected in February’s collections).

After the Finance Minister Abdulla Jihad warned that this loss of income could amount to US$6million month, the decision was made to reintroduce the bed tax – charged at a flat rate of $8 per bed night – until November this year.

Bed tax amounted to over US$4.5 million in March, or 7.1 percent of MIRA’s collected revenue which came to MVR938.2 million. Over 75 percent of March’s income was received in US dollars.

The authority’s figures for 2013 showed an income of MVR8.7 billion – of which 60 percent was denominated in dollars.

Despite this foreign currency income, however, dependence on imported goods results in a persistent dollar shortage, with just 2.7 months worth of reserves remaining at the end of February.

Proposals to increase government revenue were debated during February’s emergency Majlis sessions which also resulted in the requirement that resort lease extensions be paid within 2 years.

Additionally, the government has suggested that the Airport Service Charge, which has seen MIRA collect US$7.9million from foreigners leaving the country this year, be increased by 38 percent.

A World Bank report at the end of 2013 urged the government to reduce spending in order reduce the “unsustainable” public debt which currently stands at 81 percent of GDP, and could rise to 96 percent by 2015.

“Maldives is spending beyond its means and financing the budget risks affecting the real economy,” the report said.

Meanwhile, the outgoing governor of the MMA in December called for the state to reduce expenditure and to cease from printing money.

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Government finances “further deteriorated in first six months of 2013”: MMA Quarterly Economic Bulletin

Government finances “further deteriorated in the first six months of 2013” due to a sizeable shortfall in expected revenue coupled with a marked increase in recurrent expenditure, according to the Quarterly Economic Bulletin of the Maldives Monetary Authority (MMA) released last week.

The central bank observed that the government’s target of reducing the budget deficit to 3.6 percent of gross domestic product (GDP) this year from 12.6 percent in 2012 “now seems rather challenging.”

“These developments have resulted in a widening of the budget deficit as indicated by the large financing requirement of the government during the first six months of 2013. The difficulties in accessing long-term foreign funds to finance the budget deficit resulted in the government resorting to the Maldives Monetary Authority (MMA) and other domestic sources to finance its growing deficit,” the report stated.

The economic bulletin explained that around 15 percent of total revenue budgeted for 2013 – MVR1.8 billion (US$116.7 million ) – was to be raised from new revenue measures, “which so far have not materialised.”

The revenue raising measures proposed in the 2013 budget included hiking Tourism Goods and Services Tax (T-GST) to 15 percent from July 2013 onward, raising airport service charge to US$30, leasing 14 islands for resort development, raising tariffs on oil, introducing GST for telecom services, and “selectively” reversing import duty reductions.

In April, parliament rejected government-sponsored legislation to raise the departure tax on outgoing passengers, prompting Finance Minister Abdulla Jihad to seek parliamentary approval to divert MVR 650 million (US$42 million) allocated for infrastructure projects in the budget to cover recurrent expenditure.

The move followed a cabinet decision to delay implementation of new development projects financed out of the budget due to shortfalls in revenue.

The economic bulletin meanwhile revealed that total revenue in the first half of this year (MVR5.9 billion or US$382 million) increased by 22 percent compared to 2012 on the back of a 35 percent increase in tax revenue.

Tax revenue was “boosted by favourable receipts from GST [Goods and Service Tax] and Business Profit Tax (BPT).”

While GST receipts rose by 46 percent, “contributed by the increase in the rate of GST on the tourism sector (T-GST), from 6% to 8% on 1 January 2013,” BPT receipts increased by 83 percent.

The MMA report explained that BPT collection this year was “based on financial returns for the twelve months ending June 2012, while the BPT collections made in 2012 were based on the financial returns of for the six months ending August 2011.”

Growing government spending

The economic bulletin also revealed that the total government expenditure of MVR6.7 billion (US$435 million) in the first half of 2013 was 8 percent higher than the same period in 2012.

The growth of government spending was “entirely due to the 21 percent (MVR965.3 million) growth in recurrent expenditure, which was partly offset by the 26 percent (MVR440.6 million) decline in capital expenditure during the period.”

Capital expenditure declined due to the government’s decision to suspend infrastructure projects financed out of the budget “in the face of significant shortfalls in revenue due to the inability to implement new revenue measures.”

The increase of recurrent expenditure was meanwhile “driven by the increase in spending on wages and salaries and government pension contributions, both of which largely reflects the transfer of employees in health corporations to civil service commission and employees in Aviation Security Service to Ministry of Defence and National Security starting from January 2013.”

In its professional opinion on the budget proposed for 2013, the Auditor General’s Office had suggested “major changes” to right-size the public sector and “control the salary of state employees and expenditure related to employees” to rein in the budget deficit.

The Auditor General observed that, compared to 2012, the number of state employees was set to increase from 32,868 to 40,333 – resulting in MVR 1.3 billion (US$84.3 million) of additional expenditure in 2013.

This anticipated increase included 864 new staff to be hired by the Maldives Police Service (MPS) and Maldives National Defence Force (MNDF).

Deficit financing

The budget deficit forecast for 2013 was MVR 2.33 billion (US$149 million) – to be financed by MVR 1.15 billion (US$74.5 million) in foreign loans and MVR 1.17 billion (US$75.8 million) in domestic finance.

The MMA’s economic bulletin noted that the budget deficit was largely financed from domestic sources, including the issuance of treasury bills (T-bills) to banks and non-bank sectors.

“At the end of June 2013 the total outstanding debt stock of government securities (T-bills and T-bonds) rose to MVR11,702.3 million which reflects a net issuance of MVR586.9 million in the first half of 2013 compared with MVR615.8 million in the same period of 2012,” it stated.

“Meanwhile, with the increasing challenges faced by the government in financing its growing deficit through domestic sources, the government at times had to resort to the MMA, to finance its deficit. During the first six months of 2013, the change in MMA net credit to government increased to MVR781.0 million from MVR131.2 million in the first six months of 2012.”

The country’s trade deficit also widened in 2013 compared to the same period last year due to higher level of imports, which “reflects the increase in domestic demand driven by economic recovery and the increase in government expenditure.”

While gross international reserves increased in the first six months of 2013 due to the “accumulation of foreign assets by the commercial banks,” the bulletin noted that, “in terms of import cover, gross reserves remained unchanged at 2.5 months in June 2013 reflecting the acceleration in import growth.”

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Government suspends new development projects due to budget constraints

The government has decided to delay implementation of new development projects financed out of the state budget due to shortfalls in revenue, Finance Minister Abdulla Jihad confirmed to Minivan News today.

Jihad said that the cabinet decided to postpone planned infrastructure projects that have not yet started in an attempt to ease cash flows rather than deducting a specific amount from the development budget.

“We are in the process of [drawing up a supplementary budget]. Hopefully by the end of the month we will have something,” he said.

The decision to suspend new projects was revealed by Housing Minister Dr Mohamed Muiz today following the signing of contracts to build harbours in four islands.

Speaking to press after the signing ceremony, Muiz said he was instructed by the finance ministry not to commence any further infrastructure projects included in the 2013 budget, such as harbour construction or land reclamation.

Muiz explained that government-funded projects in the pipeline will be pushed back until parliament passes bills to raise additional revenue.

The move follows parliament’s rejection last week of government-sponsored legislation to raise the airport service charge to US$30, which was among a raft of measures proposed by the Finance Ministry in the estimated 2013 budget to raise MVR 1.8 billion (US$116 million) in new income.

Other measures included hiking Tourism Goods and Services Tax (T-GST) to 15 percent from July 2013 onward, leasing 14 islands for resort development, introducing GST for telecom services as well as oil, and “selectively” reversing import duty reductions.

Following the narrow defeat of the airport service charge amendment bill in parliament, Jihad told local media that a “significant amount” would be lost from projected revenue as the additional income was anticipated in budget forecasts.

“If the amendments for the import duty are not passed, we will find it extremely difficult to manage the budgets of institutions. So it’s critical that the parliament expedites work on the bills and support them,” he was quoted as saying by newspaper Haveeru.

The bill proposed by the government to raise the airport service charge was defeated 28-27 despite the ruling coalition’s provisional majority in the 77-member house.

During the parliamentary debate last week, MPs of both the opposition Maldivian Democratic Party (MDP) and government-aligned Progressive Party of Maldives (PPM) – respectively majority and minority parties in parliament –  accused President Dr Mohamed Waheed of using state funds to finance his presidential campaign.

Supplementary budget

Dr Waheed meanwhile told the people of Thulusdhoo in Kaafu Atoll yesterday (April 20) that there was no cause to worry about the budget or rumours of impending bankruptcy.

“The Maldivian economy is not really that bad,” he was quoted as saying by Haveeru.

President Waheed however conceded that “difficulties” had arisen due to spending beyond the country’s means in the recent past.

As a consequence of deficit spending financed by loans, Dr Waheed said the government had to spend an amount almost equal to the state’s wage bill on interest and loan repayments.

“We Maldivians are not indebted to anyone. We are proud people. We pay back what we borrow. We don’t have any outstanding payment, to any party,” Dr Waheed said in his speech, according to the President’s Office website.

He added that the finance ministry was preparing to submit a supplementary budget to parliament before the end of April, which would seek funds needed to provide services to the public without interruption.

Economic Development Minister Ahmed Mohamed – a senior member of the government-aligned Dhivehi Rayyithunge Party (DRP) – however told Haveeru last week that a supplementary budget would be of no use if parliament failed to approve the proposed revenue raising measures.

“Numbers written on paper will not increase funds. One or two billion rufiya can be added to the budget through the supplementary budget,” he explained. “But shouldn’t there be a way to get that three or four billion rufiya?”

The minister also referred to media reports suggesting that some government offices have exhausted their annual budgets after the first three months of the year.

Parliamentary approval

During the budget debate in December 2012, Majority Leader MP Ibrahim Mohamed Solih warned that the additional revenue projected in the budget was unlikely to materialise.

The MDP parliamentary group leader claimed that the import duty revision to raise tariffs on oil “will not be passed in this Majlis.”

Moreover, he said at the time, the MDP would not support increasing T-GST without consultation with the tourism industry.

Predicting that revenue in 2013 would reach “only MVR 11 billion at most,” Ibu warned that income would not be enough to meet recurrent expenditures on salaries and administrative costs.

Meanwhile, Minority Leader MP Abdulla Yameen, parliamentary group leader of the PPM, said at the time that the government’s objectives or policies could not be discerned from the proposed budget.

“These projects are very random or ad hoc. The government’s planning should be better than this,” he said.

While President Waheed had taken note of the high salaries paid by institutions such as the People’s Majlis as “a serious problem,” Yameen said he could not see “any kind of sign” of reducing recurrent expenditure or salaries and allowances for government employees.

The state’s wage bill amounts to 48 percent of recurrent expenditure, which accounts for 70 percent of government spending.

2013 budget

A public sector investment program (PSIP) of MVR 3.1 billion (US$201 million) was proposed within the 2013 budget.

This included MVR 1.5 billion (US$97 million) from the state budget, MVR 21 million (US$1.3 million) from domestic loans, MVR 1.2 billion (US$77 million) as foreign loans and MVR347.6 million (US$22.5 million) as free aid.

After parliament trimmed more than MVR 1 billion (US$64.8 million) from the MVR 16.9 billion (US$1 billion) budget submitted by the Finance Ministry, Jihad warned that funds allocated in the budget would not be enough to manage expenses and predicted that a supplementary budget would be needed before the end of the year.

Parliament’s Budget Review Committee approved MVR 1.6 billion (US$103.7 million) in cuts from recurrent expenditure and added MVR 389 million (US$25.2 million) for infrastructure projects.

The budget items that the committee reduced included; overtime pay (cut 50 percent), travel expenses (cut 50 percent), purchases for office use (cut 30 percent), office expenditure (cut 35 percent), purchases for service provision (cut 30 percent), training costs (cut 30 percent), construction, maintenance and repair work (cut 50 percent) and purchase of assets (cut 35 percent).

The committee also instructed the Finance Ministry to reduce an additional MVR 605.7 million (US$39.2 million) from office budgets.

In December 2012, the Finance Ministry ordered offices to cancel all overseas trips, such as for study tours and training, and to seek approval from the ministry for all official trips that were not completely funded by foreign parties; cancel all repair work for the rest of December; and cancel purchases of capital items that were not included in the public sector investment programme (PSIP).

In the circular, the Finance Ministry noted that 15 percent had previously been deducted from office budgets to reduce the fiscal deficit “as a result of income being lower than estimated in the 2012 budget passed by parliament.”

However, since government spending necessary to provide essential services to the public could not be reduced, “the state’s expenditure has to be further controlled as additional measures are needed to reduce the state’s budget deficit,” the circular stated.

In July 2012, the Finance Ministry instructed all government offices to reduce their budgets by 15 percent, with only 14 of 35 offices complying by the given deadline.

“Some offices will face difficulties. But we don’t have a choice,” Jihad told local media at the time.

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GMR and government to seek “win-win situation”: Razee

Infrastructure company GMR has said it will deduct revenue received from collecting a US$25 (Rf385.5) Airport Development Charge (ADC) from every passenger departing on an international flight from the concession fee to be paid to the government.

GMR informed Maldives Airports Company Limited (MACL) last Thursday of its decision. MACL officials had not responded to inquiries at time of press.

GMR planned to begin collecting the ADC at midnight on January 1 this year as per its contract with the Maldives government. Revenue was expected to amount to US$25 million (Rf385.5 million) in 2012, and would be put towards the ongoing development of Ibrahim Nasir International Airport (INIA).

However, a Civil Court ruling in December blocked the ADC on the grounds that it was identical to an existing Airport Services Charge (ASC) of US$18 (Rf277.56). The company’s shares on the Mumbai stock exchange subsequently fell 7.57 percent, India’s Economic Times reported.

The government subsequently appealed the case to the High Court. Meanwhile, GMR is not collecting the ADC.

Economic Development Minister Mahmoud Razee said that the concession agreement between GMR and the government assured each party a certain level of income.

“Because the ADC was included as revenue, until the matter is resolved any money that was going to be received from the ADC should be deducted from what GMR owes the government,” Razee explained.

Razee said that the Ministry of Finance will work with GMR and the government to resolve the matter, adding however that much of the decision rests on a verdict from the High Court.

He added that the related Amendment of Collection of Airport Tax (international travelers) Act 7/78 Bill is also before the Parliament, which is currently in recess until March.

Razee was optimistic about the outcome, however far in the future.

“The contract between the government and GMR allows for certain changes which are mutually respected and agreed upon by both parties,” Razee observed. “They will reach a win-win situation, even if some revenue is lost.”

GMR previously noted that the payment of a development fee was “a common concept in many airports globally”, particularly as a part of concession agreements where airports are privatised.

“The reason for the inclusion of ADC in many global concession agreements is to address the funding needs to meet the investment model required to upgrade and develop new airport facilities at significant costs,” GMR stated.

The company further claimed that the charge was included in the concession fee proposed between GMR and the government in 2010.

Meanwhile, in April India’s Supreme Court ruled against the charging of airport development fees which are not approved by India’s Airport Economic Regulatory Authority (AERA). However Delhi airport, developed by GMR, continued to charge the fee as GMR had obtained permission to collect the sum in 2010.

Speaking at the groundbreaking ceremony for INIA’s new terminal on December 19, President Nasheed said he wished to assure GMR that the government was “200 percent behind your contract, and every single other contract the government has signed with any other foreign party in this country. Not just contracts signed by our government, but also contracts that any ruler of the Maldives has signed with any party. We will honour it.”

The public response has not been so positive. Following GMR’s closure of duty-free shop Alpha MVKB, company CEO Ibrahim Shafeeq organised a protest under the slogan “Go GMR Go!” The protest was held on the grounds that the company was “demonstrating our opinions and dislike of what GMR has done to us and to get public responses,” Shafeeq told Minivan News at the time.

Kulhudhuffushi-South Independent MP Mohamed Nasheed also proposed an amendment to the Business Registration Bill in a bid to reserve airport shops and services for local ownership and “clip GMR’s wings”.

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Dhiraagu re-registered as public limited company

Telecommunications company Dhiraagu has re-registered as a public limited company (Plc).

The company actively took the name Dhivehi Raajjeyge Gulhun Plc, however it will continue to use the brand name Dhiraagu.

Dhiraagu is one of the largest telecommunications companies in the Maldives, along with Wataniya. It is also one of the country’s most profitable companies.

On 24 August this year, the Maldivian government revealed a plan to turn over one-third of its shares in Dhiraagu to the public. The sale was expected to generate Rf 1.46 billion (US$95 million).

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Finance Ministry appeals for cooperation with cost-cutting measures

The Finance Ministry has appealed for cooperation from all state institutions to the government’s cost-cutting measures by not hiring additional staff, creating new posts or replacing vacancies.

A budget circular issued by the ministry on Sunday notes that expenditure on state employees accounts for 35 percent of government spending in the 2011 budget while 49 percent of government expenditure so far this year (excluding foreign loans and free aid) was on salaries and allowances.

“Lately a number of institutions have been requesting permission from the ministry to add new posts in 2011 and hire employees for vacant posts,” reads the circular signed by Finance Minister Ahmed Inaz. “However since the ministry believes that, considering the state of the budget, there is no space to add employees or fill vacant posts this year, the ministry urges cooperation for controlling the number of employees.”

As part of the government’s belt-tightening measures to curb expenditure, the circular notes, the Finance Ministry requires offices and state institutions to seek authorisation in writing for capital expenditure and overseas trips as well as repair and maintenance work.

The ministry had previously informed all state institutions to not create new posts or fill vacancies, the circular noted.

“In addition, posts of employees who leave their government jobs under the ministry’s “voluntary redundancy programme” has been abolished,” it added. “The ministry believes that as a result of this programme expenditure on employees out of the state budget will be controlled to an extent.”

The Finance Ministry recently revealed that the country’s fiscal deficit in 2011 reached Rf1.3 billion (US$84 million) in the first week of September.

The circular meanwhile noted that the government has pledged not to raise nominal wages until the end of 2012 under the staff-level agreement with the International Monetary Fund (IMF).

In May, the IMF gave preliminary approval for a three year economic programme in the Maldives, after the government agreed to “a package of policy reforms that will help stabilise and strengthen the Maldives’ economy.”

“In sum, this package of proposed policy reforms will help stabilize and strengthen Maldives’s economy, and the mission thus reached a staff-level agreement with the Maldivian authorities on a three-year economic program that could be supported by a new IMF lending arrangement,” reads an IMF press statement in May. “The agreement reached, however, remains subject to review by IMF management and approval of the IMF’s Executive Board, which could consider a program request from Maldives in July. It is anticipated that an approved program would encourage key donors to contribute additional financial support.”

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Government’s bill reduces tourism revenue “but improves investor confidence”

The government has proposed an amendment to the Tourism Act that reduces the rent resorts pay as well as extending the lease period to fifty years, a move which would significantly reduce the government’s income from the tourism industry in the short term.

The bill was proposed by MDP MP Ibrahim Mohamed Solih, who said the main aim of the bill “is to improve investor confidence and performance of the tourism sector.”

Solih said rent would be charged depending on the resort’s area and not number of beds. Resorts are now to pay US$7 for each square metre.

Resorts would also be categorised according to their size; the smallest group being from 100,000-200,000 m²; the second from 200.000-400,000 m², and the largest is above 400,000 m².

Solih said this will ease the burden on resort owners and will help resorts currently under construction around the country.

He noted that this would reduce the government’s income from the tourism sector from Rf 1900 million (US$148 million) to about Rf 1300 million (US$101 million).

Creating an investor-friendly environment

Minister of Tourism, Arts and Culture, Dr Ali Sawad, said the amendments to the Tourism Act will create more macro-economic opportunities in the Maldives.

“It is geared towards achieving three objectives: the first is transforming leases to land rent. The second is phasing out the bed tax, and the third is increasing the lease from a minimum of 35 years to a minimum of 50 years.”

Resorts currently pay a flat rate of US$8 per occupied room, per night, known as the ‘bed tax’, however the resort industry has criticised this as a disincentive to increase capacity and promote expansion, and limited potential revenues in the future.

Dr Sawad said since all the revenue streams are linked, any amendments to the bill will have a “ripple effect on the economy” and would create an environment for greater investments as investment costs are decreased.

He assured that the amendments would bring in more revenue starting from next year, but admitted the government would see “a slight drop [of revenue] during the transition. It’s all part of a larger fiscal policy.”

The amendments to the bill would ultimately “not lower revenue” from the tourism industry, as they were intended to make investment in the Maldives “more attractive.”

Former Minister of Tourism Abdulla Mausoom said “we definitely have to create a positive investment environment in the country,” because in the last year and a half, “investor confidence has been down.”

He said the outcome of both the tourism bill and the taxation bill “are not certain.”

“The Maldives is very small and our natural resources are limited,” Mausoon said. “The government has a responsibility to look after our resources.”

He said he believed “it is not in the best interest of the country” when an investor is willing to pay a better price and the government had set a lower fixed price.

“We should facilitate and investor-friendly environment without eliminating the competitiveness of the market,” he said.

Mausoon suggested the government set a minimum fixed rate and have bidders propose higher bids from there. He said most of islands desired by resorts were what he termed, “micro-islands” or those less than 10 hectares in size (less than 0.1 km²).

“The government has a responsibility to safeguard our assets,” Mausoon said, noting that if investors are willing to pay more, “they should be allowed to pay more.”

‘Sim’ Mohamed Ibrahim from the Maldives Association of Tourism Industry (MATI) said “we think this a very forward-thinking bill. Obviously there are little tweaks needed, but overall it’s a good bill that has come at the right time.”

Sim said “the government has worked closely with the tourism industry to develop this bill” and had consulted with the industry “at every stage.”

Bed tax and island lease vs. GST and land rent

Currently, the cost a resort pays the government is based on the number of beds it has. Dr Sawad said on average, the government was making anywhere from US$3,500-20,000 per bed every year, generating a total of US$47 million in revenue from the bed tax per year.

He said a “conservative estimate” of how much revenue the government’s proposed Goods and Services Tax (GST) is expected to bring in was over US$60 million a year. He noted that the tax revenue would continue to increase as the tax net widens.

Dr Sawad said the bed tax would be phased out in the next three years when the GST is in place.

He also said the leases for resorts currently brought in around US$78 million, while the land rent should collect about US$60 million a year.

“By addressing the lease rent head on, we will be able to reduce investment costs, which makes for a more attractive investment,” he said.

However Mausoom said the land rent increases the uncertainty for the tourism industry, because there is no guarantee as to how many beds will be developed on then land: “A resort owner can build as many rooms as possible.”

“This US$7 per square metre is very misleading,” he added, noting that “the government will only be getting three set rents: US$1 million [per month] for the islands in the smallest bracket. For the middle bracket it will be US$1.5 million, and US$2 million for the larger islands. It doesn’t make sense.”

He pointed out the smallest bracket—those islands smaller than 200,000 m²—“should catch at least US$1.4 million, if you multiply it by US$7 per square metre. It’s totally misleading.”

Another thing he believes is unfair is the government’s decision to wait until the GST is in place before ratifying the Tourism Act. “They can’t put a condition like that,” he said, “it’s putting an extra burden on resort owners.”

Mausoom also said he believed there were “many discrepancies” in how the MDP is trying to consolidate the different bills and acts concerning fiscal policy, and said “the government has to start singing the same song. A song that is nice to the Maldivian people, nice to the investors, and nice to the tourists.

Sim explained that the amount the government will lose in land rent (compared to the current lease and bed tax scheme) would be offset by the GST levy, “which would go hand-in-hand with this bill.”

He said adding the business profit tax, GST and land rent, the resorts will “probably pay more than they do currently alongside existing government revenues from customs duties.”

He added that the three year waiting period to phase out the bed tax “is a bit long and [we] will try to lobby for one year.”

Sim also noted that the major issue with the Maldives’ tourism industry is capacity: “The industry can only grow through an increase in capacity. The current situation is good for people who have established, successful properties, [but not for new investors].”

The new system, he said, would offer businesses “certainties” and reduce the current level of “maneuvering” occurring within the industry.

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