Damage from overseas tour operator TGST ‘irreversible’, Fayyaz says

Former Economic Minister Fayyaz Ismail has said that further changes to the law requiring overseas tour operators, travel agencies and online booking platforms to pay Tourism Goods and Services Tax (TGST) would not reverse what he described as damage to the Maldives tourism industry and the country’s reputation.

His remarks came after Tourism Minister Mohamed Ameen announced that President Mohamed Muizzu had decided to make further changes to the tax rules following concerns raised by tourism industry stakeholders and overseas travel companies.

Amendments made to the Goods and Services Tax Act in August brought overseas tour operators, travel agencies and online booking platforms selling Maldives resorts and guesthouses within the tax framework, even if they do not have an office in the Maldives.

The changes impose the existing 17 per cent TGST rate on specified tourism-related supplies by those businesses. The government has said the changes were introduced to apply the destination principle to the taxation of tourism services.

The provisions have since come into effect despite concerns raised by tourism industry stakeholders and overseas tour operators and travel agencies.

Speaking at the closing session of the MDP congress on Saturday night, Fayyaz criticised the government’s handling of the issue, saying the decision to introduce the tax and then consider further amendments demonstrated a lack of planning.

“Look at the things being done without knowing where they are going. Now they are reversing course again. They said they would collect TGST from foreign tour operators, and now they are moving towards deciding not to collect it,” Fayyaz said.

Ameen announced on Saturday that the President had decided to amend the law after receiving submissions from tourism industry stakeholders, tour operators and travel agents. He did not provide details of the changes being considered.

Fayyaz said that while reversing the tax measure would be the right decision, the government had already caused damage by introducing it.

He claimed that the announcement and implementation of the measure had affected businesses selling Maldives tourism products and damaged confidence in the destination.

“Even if the law is changed, that cannot be recovered,” Fayyaz said.

He claimed the country had suffered losses amounting to billions of dollars as a result of the policy, although he did not provide figures or evidence to support the estimate.

“We have lost several billion dollars. An economy that had moved forward steadily has been shattered,” he said.

Fayyaz also claimed the policy had undermined work carried out over generations by Maldivians and private businesses to develop the tourism industry.

“In addition to losses of several billion dollars, we have set our industry back by 30 or 40 years. This is irreversible damage,” he said.

Overseas tourism industry groups have raised concerns about the tax changes since they were announced, with some calling for their implementation to be postponed or withdrawn.

The government has not yet announced the details of the proposed amendments or how they would affect the tax obligations that have already come into force.