Male’, Maldives, 6th August 2022 – The Maldives Association of Travel Agents and Tour Operators (MATATO) has engaged with the international and domestic stakeholders, including the government of the Maldives, the International Monetary Fund (IMF), the tourism associations and others, regarding the impact of the proposed tax increases and other proposed measures by the government to address the national deficit.

MATATO calls on the government to take into consideration the impact of tax increases and lackluster government austerity measures upon the most productive sector of the Maldivian economy, accounting for 74% of the gross national income, and especially, its impact on the Small and Medium Enterprises (SMEs). 

Among the tourism associations MATATO consulted with last week were: the Maldives Association of Tourism Industry (MATI), the NAtional Boating Association of Maldives (NBAM) and the NAtional Hotel and Guesthouse Association of Maldives (NHGAM). All these associations expressed similar concerns, including the timing for a proposed increase to the domestic and tourism goods and services taxes (GST and TGST) was ill conceived and potentially debilitating for many of their members.

Photo credits | Maldives Tourism Ministry

Last week, MATATO and MATI also met with the IMF team that was visiting to engage with the government on tax policies. Their proposed agenda included discussions on the Green Tax and possible alternatives such as some form of carbon-based taxation, changes to the tourism land rents and airport charges, as well as taxes on fuels, vessels (air and sea), and bottled water. The MATATO team attending the meeting argued that the IMF experts and government advisers appear to be ill-informed on the realities of commerce in the Maldives, especially within the tourism sector and regarding their contractual obligations with tour operators. The team further expressed their dismay that the IMF team chose to meet with the stakeholders of the Maldivian economy only after they had published their “findings” and presented the report to the government. Many of the other major stakeholders and associations were not a part of the consultation process either. They were, in turn, informed by the IMF taxation team to engage with their country team regarding these concerns. 

The opinions and evidence that MATATO provided is based on a comprehensive outreach and a throrough survey of our foreign partners. This survey was conducted with the participation of over 300 foreign tour operators from around the world, represnting over 50% of current arrivals to the Maldives. The results were overwhelmingly negative, indicating an unfavourable impact on demand for the Maldives when compared to competing nations. Many beach destinations that were closed in 2021 but reopened recently are aggressively competing against the Maldives, including Indonesia (Bali), Thailand (Phuket, Ko Samui), Philippines, Malaysia, Mauritius, Seychelles, Caribbean Islands, Bora Bora and many others.

Photo credits | MMPRC / Visit Maldives

Furthermore, MATATO shed light on the negative impact that the Maldives and especially its tourism industry has faced due to the changes in the global economic climate, including changes in consumer behaviour due to weakening currencies and increasing airfare prices to the Maldives. Increases in prices resulting from increased taxes will negatively impact demand even further. In order to stay competitive, this summer season saw discounts of 30%-40% from the tourism sector, which would in turn negatively impact tax receipts. As demand and revenue falls as a result of increased taxes approaching and possibly crossing the sustainably threshold for the Maldives, the anticipated revenue from tax increases will not materialise and the entire nation will suffer consequently. 

Instead of taxing its most productive sector, MATATO calls on the government to increase partnership efforts with the industry to increase arrivals, the duration of tourist stays, and margins on rates, all of which will also increase government revenue and employee service charges.

Lastly, the Association notes that the Ministry of FInance has yet to share austerity measure details on how it plans to reduce the government expenditure. MATATO reiterates that this is an opportunity for the government to restructure its spending to be less wasteful, especially when concerning the following: subsidies, public sector investment projects (PSIP), competitive bidding on infrastructure projects, recurrent expenditure on political appointees, expenses of State Owned Enterprises (SOEs) and other expenses.

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