Nasheed warns new tourism tax, FX rules could harm industry

Former President and opposition Maldivian Democratic Party (MDP) President Mohamed Nasheed has raised concerns over changes requiring resorts to convert 40 per cent of their foreign currency revenue and overseas tourism businesses to register for tax in the Maldives, saying the measures could harm the tourism industry and economy.

Speaking at a press conference at the MDP office on Wednesday, Nasheed criticised recent changes to the foreign currency and Goods and Services Tax (GST) laws introduced by the government as part of efforts to address the country’s foreign currency shortage.

Nasheed said requirements under the foreign currency framework would require resorts to provide the Maldives Monetary Authority (MMA) with information on their expenditure.

“These are matters that businesses will be very concerned about,” Nasheed said. “A business is operated by an entrepreneur to make a profit. Requiring them to open up their business practices and strategies to others, including competitors, creates a major obstacle and risk to their business.”

Nasheed said businesses were required under the law to provide the information to the MMA, while uncertainty remained among businesses over how the authority would handle the information.

He also questioned the requirement for resorts to convert 40 per cent of their foreign currency revenue through the banking system.

According to Nasheed, resorts already convert more than 60 per cent of their dollar revenue to meet operational expenses.

“That is for the expenses they have to meet. If they are required to convert another 40 per cent on top of that, we cannot see how these businesses can continue to operate properly,” he said.

Nasheed argued that the requirement would not resolve the country’s dollar shortage and could instead affect businesses.

“In my view, these regulations will not provide a solution to the dollar shortage. In addition, they are regulations that could cause significant harm to businesses in the Maldives,” he said.

Nasheed also raised concerns over amendments requiring overseas suppliers of Maldives tourism products and related booking and agency services to register with the Maldives Inland Revenue Authority (MIRA) and pay GST.

He argued that requiring overseas tour operators to register with MIRA could affect the Maldives tourism industry and public finances.

Nasheed claimed the requirement was inconsistent with international taxation principles and could pose risks to the supply of tourists to the Maldives. Overseas tourism operators have also raised concerns about the changes and called on the government to delay their implementation, he said.

“Overseas operators believe they can argue that the Maldives is applying its tax laws beyond the jurisdiction of the Maldives,” Nasheed said.

He said some overseas operators had also questioned whether the changes were intended solely to strengthen foreign currency inflows.

Nasheed further referred to concerns he said had been raised by overseas operators about the government’s broader tourism policies. He claimed some operators were questioning the policy direction behind the changes, including in relation to discussions by government officials about developing halal tourism.

Nasheed said the combined effect of requiring overseas tourism operators to register with MIRA and resorts to convert 40 per cent of their foreign currency revenue presented risks beyond public finances and the economy.

“I want to point out that requiring overseas operators to register with MIRA and requiring the conversion of 40 per cent of dollar revenue are not only major challenges to the Maldives’ finances and economy, but also to its security and stability,” he said.