Tax hikes shouldn't disrupt tourism, MP Abbas says
He noted that guesthouse operations, which are already facing challenges, could be especially affected by such tax changes.
Velidhoo MP Mohamed Abbas on Tuesday called for a balanced approach to increasing tourism-related taxes in the Maldives, emphasising the need to avoid disruptions to the industry.
Abbas, who is also the vice-president of the Maldives Development Alliance (MDA) run by businessman Ahmed Siyam Mohamed, made his remarks during discussions on the Progressive National Congress (PNC)’s proposed amendment to the Goods and Services Tax (GST) Act, which includes a 17% increase in the Tourism Goods and Services Tax (TGST).
While expressing support for the government's proposed amendment, Abbas highlighted various concerns. He noted that global events, such as ongoing conflicts, are impacting tourism in the region, including in neighbouring Sri Lanka. He pointed out that Sri Lanka’s economic stability and improved tourism sector could affect the Maldives' competitive position.
“Tourism is the backbone of our economy,” Abbas stated, emphasising the impact of sudden increases in TGST, green tax, or airport tax on businesses, particularly small and medium enterprises.
He noted that guesthouse operations, which are already facing challenges, could be especially affected by such tax changes.
Citing an example, Abbas mentioned that guesthouses operated by his Sabba Travels and Tours in N. Fodhdhoo have been struggling to attract guests for the past four months due to global conflicts, contrasting with the previous four years when their 33 beds were consistently filled.
Abbas underscored the importance of adjusting the tax system to address the country's economic challenges while maintaining the confidence of foreign investors.
“If we need to raise taxes to support economic development and provide essential services, it should be done,” he said, adding that any such increases should be implemented in a way that does not hinder the tourism sector.
He also highlighted the risk of neighbouring countries offering competitive packages to attract tourists.
Abbas raised concerns about a recent government decision requiring tourism companies to exchange $500 in banks, noting that it has led some resorts to pay salaries and service charges in Maldivian Rufiyaa rather than dollars. He mentioned that resort human resources departments have informed staff about this change, although he refrained from naming the specific resorts involved.
Abbas also commented on a common practice among resorts and guesthouses in the Maldives, which offer free meals and packages for children under the age of 12 to attract families. He cautioned that changes to taxes and additional charges could impact the appeal of such incentives, potentially affecting overall tourist arrivals.
He concluded by stressing the need for any tax adjustments to align with the realities of the tourism market, suggesting that a careful approach is necessary to maintain the industry's growth and sustainability.
