Raising the Tourism Goods and Services Tax (T-GST) to 16 per cent from 12 per cent effective next year would significantly impact Maldives’ tourism performance, particularly at a time when destination competition is intensifying post-lockdown, said industry stakeholders.
Abdulla Ghiyas, president of the Maldives Association of Travel Agents and Tour Operators (MATATO), said the government’s decision to raise taxes “is not a wise move”, stating that businesses would be “severely affected” as Maldives is already “a pricey destination and airfares are also increasing”.
His views were echoed by Mohamed Khaleel, CEO of Pulse Resorts and CEO of Manta Air, who noted that the government has not done a proper evaluation of the situation.
Khaleel told TTG Asia: “We had good tourism growth but that was when other destinations were closed due to the pandemic. Now the world is opening (up), including our competitors like Mauritius, Seychelles and Zanzibar, which have beaches as beautiful as the Maldives.”
On July 5, finance minister Ibrahim Ameer not only announced the increase in T-GST, but also the general goods and services tax (GST) – which covers the domestic sector – from six per cent to eight per cent in 2023. The T-GST covers all goods and services provided by the tourism sector, including resort supplies, travel agency services, and domestic air transport for tourists.
The T-GST was first introduced at 3.5 per cent from October till December 2011. It was adjusted to six per cent in January 2012, eight per cent a year later, and then 12 per cent in November 2014.
The tourism industry has repeatedly raised concerns over the tax increment, saying it makes the destination costlier.
In a separate statement, MATATO said this may not be the optimal time to implement tax increments, and that the full implications should be taken into consideration, including its impact on the nation’s primary revenue generating sector: tourism.
Tourism accounts for 74 per cent of the gross national income and should be properly accounted for. As all the competing beach destinations have opened their borders, it is important to stay competitive, it said.
“Any price increases will magnify the existing negative impact of fuel increases on operations, air travel, and, most of all, demand for the Maldives’ products,” MATATO noted.