Male’, Maldives, 11th December 2022 – The Maldives Association of Travel Agents and Tour Operators (MATATO) has voiced strong opposition to the mismanagement of the Maldivian economy, as represented by the recently passed legislative amendment, ratified by the President, increasing the Goods and Services Tax (GST) and the Tourism Goods and Services Tax (TGST) by 33% in the beginning of 2023. As stated by MATATO, these changes will have significant negative impacts on the most productive sector of the Maldivian economy, tourism, which accounts for 74% of the gross national income, and will have an especially the disproportionally negative impact on Small and Medium Enterprises (SMEs), as articulated in the government circular issued on 22 November 2022 on the subject of the GST increase.

Photo credits | Xinhua News

MATATO has engaged extensively with industry stakeholders to assess the burden of this change on existing bookings, cancellations, operators and properties. According to MATATO, the policy changes required by this abrupt legislative move, will see the burden of absorbing resulting loses overwhelmingly on domestic stakeholders in the first three months of 2023 (Quarter 1), resulting in a over $50 Million USD loss for the tourism industry; which includes resorts, liveaboards, guesthouses, hotels and other related businesses. This increase will also affect Maldivian workers in the tourism industry, tourism employees will see an estimate nearly of 2,000/- MVR reduction in service charges as a direct result of the implementation of these taxes, as GST is deducted from overall price and then after service charges are calculated.

As per MATATO, these abrupt changes cannot be implemented by 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.

Photo credits | Business Traveller

Furthermore, MATATO reiterates once again that Ministry of Finance has not shared details of austerity measures on how it plans to reduce Government expenditure, and that this is a necessary first step to take before threatening the economic foundation of the entire nation.

MATATO calls for the cooperation of President Ibrahim Mohamed Solih and the People’s Majlis to urgently delay the implementation of these amendments; and a public forum with all stakeholders to thoroughly and transparently evaluate the impact and the alleged benefits of the proposed tax increases.

MATATO has continued to call for Government restructuring to ensure its spending is less wasteful, especially when concerning: subsides, 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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