MP Riyaz Rasheed of the Dhivehi Qaumee Party (DQP) has withdrawn a government-sponsored amendment to the Tourism Act to keep a US$8 bed tax in place beyond 2013, citing lack of support from parties in the ruling coalition.
The flat rate of US$8 per occupied room, per night, was to be abolished at the end of this year to be offset by sales and land taxes.
The MP for Thaa Vilifushi announced that he was pulling out the legislation after the preliminary debate started at today’s sitting of parliament.
Riyaz expressed concern with the lack of support from coalition partners for revenue raising measures proposed by the government.
Riyaz, who had submitted the bill on behalf of the government, called on President Dr Mohamed Waheed’s administration to consult with pro-government parties represented in parliament before proposing further legislation.
During today’s brief debate on the proposed amendment, most MPs argued that the tourism industry would be adversely affected if the bed tax was not discontinued as planned with the introduction of Tourism Goods and Services Tax (T-GST).
Riyaz’s decision to withdraw the bed tax amendment 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.
MPs voted 28-27 against proceeding with the bill at committee stage following preliminary debate.
During the 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.
Parliament’s rejection of the government-sponsored bill prompted the Finance Ministry to suspend new development projects financed out of the state budget due to shortfalls in revenue.
Finance Minister Abdulla Jihad said that the cabinet decided to postpone planned infrastructure projects that have not yet started in an attempt to ease cash flows.
Speaking to press yesterday (April 21) following the signing of contracts for construction of harbours in four islands, Housing Minister Dr Mohamed Muiz said he was instructed by the finance ministry not to commence any further infrastructure projects included in the 2013 budget.
“As you know, the government’s budget is in a very fragile state. We can only spend what is earned as income. The government proposed new revenue measures when it submitted the budget. It was approved on principle when the budget was passed,” Muiz said.
“However according to my information, difficulties have arisen in implementation [of the measures]. As a consequence, aside from these four islands, the finance ministry has instructed me not to sign or commence with any infrastructure project in any island from now on. Unless the People’s Majlis passes new means of earning income for the government, the finance ministry has instructed us not to begin any project financed out of the government budget, be it harbour construction or land reclamation or any project undertaken by the housing ministry.”
Housing Minister Muiz – a senior member of the government-aligned religious conservative Adhaalath Party – called on all state institutions to cooperate and work together to “improve the country’s economic condition.”
Other revenue raising measures proposed with the 2013 budget 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, raising oil tariffs, and “selectively” reversing import duty reductions.
Finance Minister Jihad confirmed to Minivan News yesterday that the government was in the process of formulating a supplementary budget by the end of April.
Economic Development Minister Ahmed Mohamed – a senior member of the government-aligned Dhivehi Rayyithunge Party (DRP) – however told newspaper 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?”
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,” Solih had warned that income would not be enough to meet recurrent expenditures on salaries and administrative costs.