Tag: tax

New Year brings new tourism tax to Maldives

The New Year has potentially ushered in a new era for the Maldives’ lucrative holiday market as a Tourism Goods and Services Tax today comes into effect placing an additional charge of 3.5 per cent on a host of services supplied by the country’s travel industry.

The new tax is set to be levied on a wide of services; from room rates at resorts, guest houses and liveaboards, to tourist vessel hire and the cost of food and drink, diving schools and domestic transportation.

Speaking this week to the Agence France-Presse (AFP) service, acting Finance Minister Mahmood Razee claimed that the implementation of the new tax represented a government strategy aiming to roll out more direct national funding from Maldivian industries, where operators like resort owners have not previously been required to pay profit or income tax.

“It will gradually be extended to other [business] sectors… to reduce relying on indirect taxes, especially import duties that hurt the poor,” Razee told the AFP.

Mohamed Maleeh Jamal, Secretary General for the Maldives Association of Travel Agents and Tour operators (MATATO), said that as an organisation, it was not against a service tax within the travel market, yet he claimed that concerns existed how the funds would be implemented.

“We as MATATO have concern over the negative impact there may be from the tax on local travel agents in the Maldives, which unlike other travel markets, has no law protecting [domestic] operators,” he told Minivan News. “This can make it hard to be competitive when foreign operators are also working directly with resorts and the industry to obtain strong value.”

Pointing to key travel markets like the UK that have themselves last year instigated amended departure taxes such as an Air Passenger Duty (APD), Jamal said he believed there was international industry concern over the “Maldives becoming a more expensive destination”. He claimd that the taxation developments could hamper the country’s competitiveness against other holiday hotspots.

However, the MATATO Secretary General said that the association did not have issues with the actual figure of 3.5 per cent being added to services in itself and remained positive that MPs would still be able to help try and alleviate some industry concerns over the new tax rates.

“We are hoping we can discuss measures with parliament that will help protect local travel agents,” he said.

With the new rates in place as of today, Jamal said that the industry had already begun working with tax authorities to ensure its members and the wider travel industry understood how to deal with the new system.

“Some of our [travel] agencies have not quite been clear on how the tax works,” he said. “It takes time to become familiarised with such a new system.”

In looking back, 2010 had be seen as providing a positive turnaround in visitor figures.

Official statistics from the Ministry of Tourism, Arts and Culture released in November reported year-on-year visitor growth of 21.8 for the first ten months of the year.

Between January to October 2010, the official ministry figures showed that 63.3 percent of visitors to the Maldives came from European markets. Asia Pacific territories contributed 32.3 percent of overall travel demand to the country during the same period.

Publication of the figures followed a period of turbulence for the tourism industry towards the end of the year generated by media coverage of a video recording of a ‘false wedding’ conducted at the Vilu Reef Resort and Spa. Footage leaked onto video sharing sites like Youtube depicted some staff members mocking a Swiss couple in the local dialect of Dhivehi during a vow renewal ceremony being leaked online. The incident garnered both local and international coverage.

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Civil court rejects opposition case against airport development fee

The Civil Court has rejected a lawsuit filed today by the opposition coalition against the planned US$25 airport development fee to be charged by Indian infrastructure giant GMR, which recently won the bid to redevelop Male’ International Airport.

The coalition argue that any new tax must be approved by parliament, as per the constitution. However the Civil court dismissed the lawsuit noting that the plan had not yet been implemented.

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Comment: IMF stabilisation program threatened if Majlis ignores tax bills

The current majority of members in the Maldives Majlis have been cynically irresponsible in their handling of financial legislation.

Though they have found the energy to pass detailed amendments to the Finance Act which threatens to create administrative chaos and undermine the constitutional powers of the executive, they have ignored two tax bills – the Tourism Goods and Services Tax, and the Business Profits Tax.

These two bills are a vital part of the IMF program that stabilises the economy and keeps the country from bankruptcy.

The tax bills have been buried in the ‘Whole of Majlis’ committee for around a year, and it is obvious the members are not interested in passing them.

The sensational phone recordings released this week featured Majlis member Mohamed ‘Kutti’ Nasheed reading out a plan to ‘fast process’ the Financial Act Amendments bill and no-confidence motions, and  “cease all work on the tax bills submitted by the government to the Majlis”.

It is unlikely the IMF and international banking groups will tolerate this situation for much longer without a downgrading of the country’s credit rating, especially now the tax bills’ delay has become associated with high levels of corruption in the Majlis.

The IMF is not a benign charity. It is a hard-nosed organisation quite capable of taking action against countries that take its money and fail to keep their promises and obligations.

Unless a better taxation system is established in the Maldives, international bankers may pull the loan plug, and the public sector and lower income groups in the population will both experience job losses and extreme financial hardship.

The blame for this potential economic disaster will rest squarely on the Majlis members who the people elected in 2009.

The latest IMF report for Maldives criticises the high public sector wage bill that is “very high by international standards”, and the low tax rate for its tourism sector, which the IMF says “remains well below international standards”.

Maldives’ hotel tax rate is one of the world’s lowest, well behind India, Sri Lanka, Philippines, Indonesia, and other comparable tourist destinations such as Dominica, Fiji, Barbados, Mauritius, Costa Rica, Vanuatu, Bahamas, Seychelles, Tahiti, and Jamaica.

Most of the profits from the tourism sector go to wealthy men and families who are often members of the Majlis and/or owners of media companies. The dreaded word ‘tax’ is rarely heard in the political discussion programs that dominate Maldives’ radio and television. Print and internet website news organisations also avoid the subject of tax. Serious informative articles on economics and business are impossible to find.

Significant government tax revenues will undermine the present system of patronage and corruption that permeates Maldivian society. People’s loyalties would shift away from wealthy men towards the government, which will be able to provide pensions, subsidies, adequate salaries and health care. These are the foundations of a just and fair society.

The Majlis majority who are refusing to pass tax legislation are acting against the best interests of the people and threatening the independence and national security of the country.

All comment pieces are the sole view of the author and do not reflect the editorial policy of Minivan News. If you would like to write an opinion piece, please send proposals to [email protected]

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Plastic bag import clampdown leading to local manufacture

High government import taxes on plastic bags, intended to reduce their use, has prompted some businesses in the country to manufacture their own plastic bags.

While a 200 per cent duty import duty is levied on plastic bags, the import duty for raw materials is 25 per cent.

The manager of a popular bakery in Male’ told Minivan News that the store had a machine able to produce 45,000 to 50,000 plastic bags everyday.

He added that the bags were produced for their own use and were not for sale.

“We cannot use paper bags to pack bread,” he said. ”I do not think that it is done anywhere in the world.”

Moreover, he said, the bakery had been producing plastic bags for ten years now.

”We do not have any permission from the environment ministry,” he said. ”We did not ask for permission because we use it for our own purpose,”

He said the company imported raw materials needed to produce plastic bags.

“We sometimes produce blue color plastic bags also, we can do any color we want,”‘ he said. “We import the raw materials mainly from Dubai and Saudi Arabia.”

However, an employee in an office located behind the bakery told Minivan News that he and his colleagues were “unable to work” whenever the machine was being operated, because of the toxic fumes.

”When they turn it on, a smell like paint thinner spreads through the whole area,” he said. “We get headaches, feel like vomiting and experience difficulty breathing when the fumes reach us.”‘

Everyone in the area faced the problem, he claimed.

”The substances they uses are very toxic,” he said. ”That’s why we feel ill when the fumes are released.”

Deputy Environment Minister Mohamed Shareef said that there were two companies permitted to produce plastic bags in the Maldives.

‘There will be no company permitted in Male’,” Shareef said. ”We give the permission after conducting an environment inspection survey.”

Shareef said that the government was trying to completely ban plastic bags in the Maldives.

”We are trying to make a law to ban the importation and production of plastic bags,” he said.

Shareef concurred that the fumes released when producing plastic bag contained toxic substances.

Head of Environmental NGO Bluepeace, Ali Rilwan, said that although the government’s 200 per cent tax on plastic bags was intended to discourage people from using it ”now they have started to bring in raw materials and establish factories.”

Rilwan said that the manufacture of plastic bags in a residential area poses health risks.

”People living near the bakery complain that they can’t breathe when the machine is on,” he said.

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