Tax hike will result in loss of 20-25% bookings: Guesthouses
The guesthouse association urged the parliament to postpone the tax hike by a year.
Guesthouse Association of Maldives, which represents guesthouses, on Wednesday urged the parliament to postpone the tax hike by a year saying that 20-25% bookings could be lost if the tax is increased at this time.
At a session of the committee of the whole house which is studying the government's proposal to increase GST from 6% to 8% and TGST from 12% to 16% from next year, Financial Controller of the guesthouse association Hassan Ali Manik said that the occupancy of the guesthouse industry is below 40%. Hasan Ali Manik said the Russia-Ukraine war has posed more challenges while the industry is yet to recover from the Covid-19 crisis.
He said:
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Demand has already been impacted due to rising prices of essential commodities and flight tickets.
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Now agents have to sell rooms in an all-inclusive manner including taxes, which will have an even greater impact on the country
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Reopening of markets such as rival Phuket and selling budget packages at a much cheaper rate will impact demand; the impact will only increase as taxes increase
"We also know that services can only be provided by levying taxes. We don't disagree with that. We just want it delayed by a year," Hasan Ali Manik said.
Ahmed Waheed, a member of the executive committee of the association, said that the guesthouse market is a business that can be easily impacted. He added that every year, agreements were made with travel agents from October to November, and most guesthouses had sold the room for a year.
Further, he proposed:
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Even if taxes are hiked, the guesthouse industry should not keep the hike at par with the resorts and set a lower rate for guesthouses
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Instead of increasing direct taxes, the state should plan to increase revenue from its business profit tax paid by guesthouses by increasing the tourist number staying at guesthouses
"Our cost per room is at $40, with only a small profit margin. So let's reduce taxes and encourage the industry," Ahmed Waheed said.
Ahmed Waheed noted that in the islands, the doors have been opened for businesses such as watersports and excursions, and the general business environment is also improving.
"It is an industry that benefits a lot of people in outer islands and spreads its benefits to the entire economy. So it is not right to think only about taxes," Ahmed Waheed said.
Meanwhile, Maldives Association of Tourism Industry (MATI), an association of resort owners, on Wednesday opposed the government's proposal to increase taxes from next year.
MATI's direction came in response to a letter sent by parliament to the association seeking their views on the government's proposal to increase GST from 6% to 8% and TGST from 12% to 16% from next year. The letter was read out by Speaker Mohamed Nasheed, who presided over the meeting of the parliament's committee of the whole house which is studying the bill.
MATI has sought a minimum of 12 months or one year to implement any change in taxes.
