As the Maldives recently happily celebrated the 50th anniversary of their tourism industry, the shocking news of tax increases slowly turned the year bleak. While TGST rates is to increase from 12 percent to 16 percent and GST rates to increase from 6 percent to 8 percent, the recent press release published by the Maldives Association of Travel Agents and Tour Operators (MATATO) stated that this abrupt move will have a negative impact on the domestic economy, resulting in over USD 50 million loss for the tourism industry.
MATATO has in its statement called on the government to take immediate action to safeguard the economy and the Parliament to intervene, as recent statements by Finance Minister Ibrahim Ameer has been misleading. This is not the first statement released by MATATO expressing their concerns over the Government’s decision to increase taxes.
When the initial conversations surrounding this topic were announced, MATATO released a statement highlighting the negative impact a sudden increase in taxes will have on the Maldivian tourism industry and the economy of the Maldives.
One additional factor that they heavily focused on in the statement released on 24th November is regarding the complications such amendments could bring with the foreign parties and travel agencies that sell tours and trips to the Maldives.
“Given that such abrupt changes cannot be implemented with our many foreign partners, including travel agencies and tour operators in Europe who are barred from changing the prices of holiday packages once sold as per EU laws. MATATO has also learned that multiple diplomatic channels have been engaged by many foreign tour operators and are making efforts to lobby the Maldivian Government to cease and desist their present course of action.” - MATATO
With a majority of the country being employed in the tourism industry and the country's economy being so dependent on the tourism industry, it would not come as a surprise if such extreme measures being implemented suddenly cause great harm to the Maldivian economy.
As trips to the Maldives are already considered a luxury to the many visitors who save up thousands to spend their dream trip in the Maldives, such sudden increase in taxes might just be the final stroke for people to find a more affordable version of the Maldives.
The Association has also reiterated the importance of expenditure reduction measures by the Ministry of Finance as first steps to take before threatening the economic foundation of the country. MATATO has called upon the government to make sure its spending is less wasteful, especially with regards to subsidies, public sector investment projects, competitive bidding on infrastructure projects, recurrent expenditure on political appointees and expenditure on various state owned enterprises.