PNC MPs call for review of proposed tourism tax hikes
Several PNC members spoke out against the proposed tax increases during a committee meeting held Wednesday.
Ruling Progressive National Congress (PNC) members of parliament on Wednesday voiced their concerns over the government's proposal to increase tourism taxes, calling for further deliberation and urging for a more balanced approach.
The debate over the three proposed bills, which aim to increase several tourism-related taxes, was initially expected to proceed smoothly, but the dissent from within the PNC has added a layer of complexity to the legislative process.
Last week, the government sent three tax-related bills to parliament, focusing on adjustments to the tourism tax structure. The proposed changes included amendments to the Goods and Services Act, particularly to raise the Tourism Goods and Services Tax (TGST) from 16% to 17% starting June 2025.
The initial debate over these bills was brief, lasting only a day, after which they were forwarded to the committee of the whole parliament for further scrutiny. Early indications suggested that the committee would swiftly pass the bills, but recent comments from PNC MPs have changed the trajectory.
Several PNC members spoke out against the proposed tax increases during a committee meeting held on Wednesday. As a result, instead of passing the bills, the committee decided to refer them to a subcommittee for more detailed consideration.
One of the leading voices of dissent came from Mahibadhoo MP Ahmed Thoriq, who expressed reservations about the speed at which the TGST increase would be implemented. Thoriq noted that tourism taxes had already undergone a recent adjustment, highlighting that the last change—from 12% to 16%—occurred in January 2023, after being passed in November 2022.
"Implementing another increase in TGST by June 1, 2025, provides too short a notice for businesses to adjust," Thoriq stated, suggesting that the deadline be pushed to October 31, 2025, to allow more time for adaptation.
Thoriq clarified that he was not against tax increases in principle but raised concerns about their frequency and the limited timeframe for businesses to accommodate the changes. Many resorts operate on yearly contracts with international operators that typically last until October 31, making mid-year adjustments problematic.
PNC MP Ibrahim Naseem also raised questions regarding the efficacy and potential downsides of the proposed tax hike. While acknowledging that the 1% increase in TGST would generate additional revenue, he emphasised the need for a more thorough assessment. Naseem pointed out that the 1% increase might drive some businesses to operate outside the formal tax system, potentially diminishing the expected financial benefits.
"There are resorts with unregistered rooms, and guesthouses that report fewer rooms than they actually offer," Naseem observed. "We must weigh the financial gain from the tax increase against the risk of increased informal activity in the sector."
He proposed that the matter be referred to the finance committee for a detailed study on the potential economic impact.
Ungoofaar MP Abdulla Rasheed, who has experience in the tourism industry, also expressed concern about the impact of increased taxes on smaller, locally-owned businesses. He addressed the proposal to raise the green tax on small guesthouses and safaris, arguing that such changes could disproportionately affect domestic tourism ventures.
Rasheed advocated for maintaining the current green tax rates for 100% Maldivian-owned businesses, which currently stand at $3 for establishments with fewer than 16 rooms and $6 for safaris with fewer than 14 rooms. He emphasised the importance of supporting local tourism entrepreneurs who contribute significantly to the Maldivian economy.
"I urge that we preserve the existing rates for small Maldivian-owned businesses, which play a crucial role in our tourism sector," Rasheed stated, underscoring the need to protect domestic investment from the potential burden of increased taxes.
The pushback from PNC MPs has led to a delay in the anticipated approval of the proposed tax increases. Instead of proceeding with a final vote, the parliamentary committee opted to refer the bills to a subcommittee for more detailed examination.
