A potential hike in taxes with effect from January 2022 will adversely affect tourism in the Maldives, and industry players are worried that the change would impact upcoming winter arrivals.
The government has proposed to increase the Tourism Goods and Services Tax (T-GST) to 16 per cent from 12 per cent, which the tourism industry believes will impact the industry greatly, particularly at a time when many other destinations have opened their borders.
Mohamed Khaleel, CEO of Pulse Resorts and CEO of Manta Air, said: “We are expecting a drop in arrivals as this has a huge impact on businesses (and customers).”
Moreover, this tax hike comes at a time when the disposable incomes of Europeans are down by 30 per cent due to the Ukraine-Russia conflict, noted Khaleel.
“It’s difficult to pass on this cost to tour operators with whom we have signed one- or two-year agreements in advance,” he added.
Current efforts to urge the government to reconsider the tax hike have failed, but the Maldives Association of Travel Agents and Tour Operators (MATATO) has appealed to the Parliament to reconsider the hike stating that it is “reckless and unprecedented”.
To strengthen its case, MATATO conducted a survey about tax hike implications with over 300 tour operator partners from around the world; who are responsible for over 50 per cent of current arrivals to the Maldives.
Survey results were overwhelmingly negative, indicating an unfavourable impact on demand for the Maldives when compared to competing beach destinations such as Bali, Indonesia, and Phuket, Thailand.
The survey also indicated that the proposed tax increase could lead to a drop in tourist arrival by almost 10 per cent in 2023, where costs will largely be borne by Maldivian-owned tourism companies.
A tour operator handling European markets, who declined to be named, said they were expecting a decrease in the number of arrivals from the UK due to the depreciation of the pound sterling owing to an economic crisis there.
“This would also have an impact on the market,” he said. He added that even though India is currently Maldives’ top source market, Indians usually stay only for three to four nights, while Europeans stay for eight to 12 nights.