The Maldives is renowned worldwide for its thriving travel and tourism industry, which injects billions of dollars into the country annually. This picturesque paradise of breathtaking beaches and scenic islands has not only captivated the hearts of travellers but has also significantly contributed to the creation of thousands of job opportunities for the local population.
The success of the Maldives' tourism sector can be attributed to its diverse revenue streams, ranging from seaplane services to online platforms connecting travellers with tour operators and travel agents. However, despite consistently being hailed as the world's leading destination, the individuals dedicated to expanding and globally connecting the country's tourism industry still face substantial challenges. These challenges primarily stem from the existence of paper companies that operate without bearing the burden of tourism and other taxes, which legitimate travel agencies must shoulder.
Highlighting the ongoing predicaments faced by local travel agencies, the Maldives Association of Travel Agents and Tour Operators (MATATO) has expressed their concerns. These issues are far from new, and local travel agencies have been engaging with various stakeholders to seek a resolution to the escalating problem of paper companies siphoning business away from local enterprises.
During a discussion forum held on October 9, 2023, the Vice-President of MATATO emphasized that one of the root causes of these issues remaining unresolved is the absence of legal guidelines regulating the operations of travel agencies. This lack of rules has created an environment where foreign entities, particularly from countries with high tourist arrivals like India and Russia, can easily establish paper companies, providing them a loophole to evade paying taxes.
The ability to form such companies and undercut local travel agencies on pricing has become a significant concern. Additionally, the sudden increase in the Tourism Goods and Services Tax (TGST) at the beginning of 2023, with no prior warning, has added to the challenges faced by local agencies. To compound these difficulties, MATATO has also pointed out that the Maldives Marketing and Public Relations Corporation (MMPC) actively provides a platform for these paper companies at major trade shows and exhibitions designed to connect business-to-business partners and strengthen their connections, further diverting travellers’ bookings to these entities.
Moreover, MATATO has drawn attention to another formidable obstacle encountered by local travel agencies involving the Bank of Maldives. The prolonged processing time, taking 4-5 days for payments in an era where last-minute bookings have become increasingly popular, is a significant factor eroding the competitiveness of local agencies. This situation was particularly exacerbated during the COVID-19 pandemic when the travel industry suffered severe losses, and local travel agencies found it exceedingly challenging to secure loans due to their exclusion from the category of small and medium-sized enterprises (SMEs).
Clearly, the Maldives' world-renowned travel and tourism sector, a vital economic pillar, faces multifaceted challenges that require immediate attention.
The proliferation of paper companies, fueled by the absence of regulatory guidelines, poses a threat to local travel agencies. Moreover, the taxation landscape and the lag in payment processing, especially during the era of last-minute bookings, are significant hurdles to overcome. Addressing these concerns is paramount to ensure the sustainability and competitiveness of the Maldives' tourism industry, which has captured the hearts of global travellers and brought prosperity to the nation for years.