Foreign tour operators warn they could stop selling Maldives over new GST rules

Foreign tour operators have warned that they could reduce or stop selling Maldives holidays in response to changes to the Goods and Services Tax (GST) framework, with some describing the measure as double taxation and raising questions about how it will be implemented.

The concerns were raised during a webinar held on Tuesday by the Ministry of Tourism and Environment, Ministry of Finance and Planning and Maldives Inland Revenue Authority (MIRA) to explain the GST amendment. Around 800 participants, including tour operators, attended the webinar.

The amendment extends the Maldives’ GST framework to services provided by overseas booking platforms, travel agents and tour operators in connection with tourism services in the country.

Comments posted during the webinar’s live chat showed opposition from a number of foreign tour operators. Participants questioned the tax structure, its implementation and the short period available to prepare before the changes take effect.

Several also warned that they could remove the Maldives from their portfolios and redirect customers to competing destinations.

One of the comments, posted under the name Merry Maldives Vacations, said the company would remove the Maldives from a tour operator portfolio that had featured the destination for 30 years.

“Before rising sea levels sink the Maldives, you are sinking the Maldives with this additional tax,” the comment said.

“We will remove the Maldives from our tour operator’s line-up, where it has been included for the past 30 years. We will then take tourists to destinations that are easier and more affordable.”

Another participant, posting under the name Katerina Fenas, argued that tour operators already paid tax in their home countries.

“We cannot support this amendment. You have decided to tax services we provide outside the Maldives. We already pay tax in our own country,” the participant said.

A recurring concern among participants was what they described as the risk of double taxation. Some tour operators said they were already subject to taxation in their home jurisdictions and questioned why their Maldives-related activities should also create a tax liability in the Maldives.

Another participant, identified as Rajab Akus, argued that the measure should not be treated as VAT and described it as a corporate tax, while expressing hope that the government had considered the consequences of the change.

Roberta Migliarini, another participant in the live chat, said the policy could place tour operators at a disadvantage compared with direct bookings.

“If a tourist books directly with a resort, this tax does not have to be paid. Therefore, tour operators will always be pushed out of the market,” the participant said.

Other operators warned that they could shift business towards destinations including Seychelles, Mauritius, Fiji, French Polynesia and Saudi Arabia’s Red Sea developments.

One participant said the new requirements would create additional administrative work, costs and bank charges for established tour operators.

“As a tour operator, I will no longer sell the Maldives. Good luck,” the participant said.

Another said operators would instead sell Seychelles, the Red Sea in Saudi Arabia, Fiji and French Polynesia.

A participant identified as Ena said it would no longer be possible to promote the Maldives at previous levels because the additional taxes and costs would make the destination more difficult to sell in a competitive market.

“Tour operators do not owe the Maldives anything. If there is no benefit in selling the Maldives, or if promoting and selling the Maldives becomes too difficult, there are other destinations,” another participant, identified as Eric Chin, said.

Some comments also criticised the government’s approach to the amendment. One participant said the changes would affect future bookings and ultimately have consequences for hotels, resorts and their employees if travellers shifted to destinations such as Seychelles and Mauritius.

Another participant argued that the government appeared to be prioritising revenue over the potential long-term effects on tourism businesses and workers.

The government has said the amendment was not introduced primarily as a revenue-raising measure. That explanation was also questioned by participants during the webinar.

One participant described the policy as an unusual way of thanking tour operators for their longstanding contribution to the Maldives tourism industry.

Questions also remained over how the rules would apply to common tour operating arrangements.

Participants asked whether agents booking airline tickets to the Maldives would be subject to the tax. Questions were also raised over how discounts, complimentary nights, rebates, cancellation fees and commissions paid to sub-agents would be treated.

Others sought clarification on how the Maldives component of a multi-destination holiday package would be valued for tax purposes when the customer pays a single overall package price.

The questions came with about two weeks remaining before implementation of the amendment.

The webinar was attended by representatives from the Tourism Ministry, including a legal representative, a personal secretary and another official. Tourism Minister Mohamed Ameen did not attend.

MIRA Commissioner General of Taxation Fathimath Ameeza, to whom foreign tour operators have been sending letters raising concerns about the changes, also did not attend. Finance Minister Hassan Zareer was also absent.

Tour operators and tourism industry representatives have opposed the amendment since it was proposed and have called on the government to withdraw or postpone it. The Maldives Association of Travel Agents and Tour Operators (MATATO) has also raised concerns over the changes.

Foreign tour operators and industry associations have separately sought a delay to the implementation, arguing that existing holiday packages were priced and sold before the new tax obligations were introduced.

Despite those calls, the government has so far maintained its decision to proceed with the amendment.

The message from several operators during Tuesday’s webinar was that continuing with the changes could affect their willingness to market and sell the Maldives.

“The world is a very big place. There are hundreds of beautiful destinations like the Maldives,” one tour operator said. “Why should we sell the Maldives at twice the price of other tropical destinations?”

The operator added that unless the tax measures were reviewed, the changes could have consequences for the Maldives tourism industry.