Monday 5th Dec 2022
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Increased taxes will negatively impact tourism industry; including businesses and employees: MATATO

The Maldives Association of Travel Agents and Tour Operators (MATATO) strongly condemned the legislative amendment ratified by the President Ibrahim Mohamed Solih to raise taxes by 33 percent, projecting that the decision will have a significant negative impact on the tourism industry; tourism businesses and tourism employees.
The tax bill proposed by the government aimed to raise Goods and Services Tax (GST) and Tourism Goods and Services Tax (TGST) rates from 6 percent and 12 percent to 8 percent and 16 percent, respectively, effective January 2023.
In a statement released to the press today, MATATO stated that the organization had assessed the market in collaboration with tourism industry stakeholders, both international and domestic, to investigate the burden of this change on existing bookings, cancellations, operators and properties. MATATO concluded that the abrupt change of legislature will cost the industry which accounts for 74 percent of gross national income, USD 50 million (MVR 771 million) in losses within the first financial quarter of 2023.
MATATO argued that the GST amendment will affect the Small and Medium Enterprises (SMEs) within the industry the most.
MATATO claimed that in addition to the resorts, liveaboards, guesthouses, hotels and other tourism industry related business suffering devastating losses within the first three months of next year, employees dependant on the service charge acquired within the industry will lose an average of MVR 2000 per month as a direct result of the GST increase. MATATO explained that service charge is calculated after deducting GST from overall price.
Speculating the abruptness of the legislature and the lack of a grace period, MATA noted that the changes cannot be implemented with foreign partners, including travel agencies and tour operators in Europe, who are barred from changing the prices of holiday packages after purchase as per the European Union (EU) laws.
MATATO shared that they had learned that various foreign tour operators had engaged their diplomatic channels in efforts to persuade the Maldivian government to suspend their current course of action.
MATATO stated that despite Finance Minister Ibrahim Ameer’s assertions that the International Monetary Fund (IMF) and World Bank’s advice had been the driving force behind tax increases, meetings with their representatives revealed the inconsistency and spuriousness behind those proclamations. MATATO clarified that IMF and World Bank met with them after finalizing their recommendations based on Ameer’s requests and therefore, indicates the flawed information provided to the parliament by the Minister to pass the amendment.
MATAT urged Minister Ameer to step down from his responsibilities as the Finance Minister claiming that he had been misleading in his actions and therefore incapable of upholding the duties of such a role. MATATO called on the government to take immediate action and encouraged parliamentary intervention to safeguard the economy.
MATATO called for the corporation of President Solih and the elected parliament to delay the implementation of the tax amendment, until a thorough and transparent evaluation of the impact; both positive and negative, is completed at a public forum with tourism stakeholders.
MATATO reiterated that the Finance Ministry’s initial step, prior to threatening the nation’s economic foundations, would have been sharing the austerity measures absorbed by the government to reduce its expenditure.
MATATO fiercely called for immediate government restructuring to curb wastefulness, especially in the context of Public Sector Investment Projects (PSIP), competitive bidding on infrastructure projects, recurrent expenditure on political appointees and expenses of State-Owned Enterprises (SOEs), among others.