MP calls for suspension of new tax on overseas tourism businesses

Galolhu Uthuru MP Mohamed Ibrahim has called for the implementation of a 17 per cent GST on overseas travel agents, tour operators and booking platforms to be suspended while concerns raised by the tourism industry are addressed.

The opposition Maldivian Democratic Party (MDP) MP made the request in a letter sent to Parliament Speaker Abdul Raheem Abdulla on Thursday, asking for the matter to be reviewed through Parliament’s Public Accounts Committee.

Mohamed said Parliament had a responsibility to provide tourism industry stakeholders with an opportunity to develop an approach that would address their concerns while maintaining confidence in the Maldives in international markets.

The changes, introduced through the eighth amendment to the Goods and Services Tax Act, extend the scope of tourism-sector GST to inbound tourism products and related agency and booking services supplied by businesses without a fixed place of business in the Maldives.

The new provisions are due to take effect from 1 October.

In his letter, Mohamed referred to a report prepared by Destination Future, an association established to work on issues affecting the long-term development of the Maldives tourism industry.

According to concerns outlined in the report, tourism occupancy has declined during the year and introducing additional tax obligations could place further pressure on businesses.

The report noted that 165 resorts are currently operating in the Maldives, with more properties under development. It argued that additional tax costs could increase the price of Maldives holiday packages and make it more difficult to attract tourists.

It also said overseas travel agents and airlines were already spending resources to generate demand for the Maldives, while applying the 17 per cent tax to overseas distribution businesses could increase package prices and reduce their margins.

The report further questioned the practical implementation of the tax. While the government expects to raise MVR 1.6 billion through the measure, it argued that it could be difficult for the Maldives Inland Revenue Authority (MIRA) to verify the prices, mark-ups and other costs of businesses operating overseas, including charter flight arrangements.

Destination Future also warned that if major overseas businesses reduce or end their Maldives operations and shift their focus to competing destinations, rebuilding those distribution channels could be difficult.

The report referred to an estimate that tourist arrivals could decline by three per cent as a result of the measure, arguing that such a decline could offset the revenue expected from the tax.

Destination Future has proposed temporarily suspending the provisions requiring overseas travel agents, tour operators and booking platforms to pay the 17 per cent GST. It has also proposed removing provisions applying the tax to overseas distribution channels.

The association further proposed establishing a National Tourism Growth and Review Working Group to focus on increasing tourist arrivals and bed nights and, in turn, increasing tax revenue. The proposal comes ahead of 2027, which is to be marked as Visit Maldives Year.

Mohamed said in his letter that the GST amendment had been introduced without an economic impact assessment or market risk analysis. He also said feasibility studies involving relevant overseas stakeholders had not been carried out.

He described the amendment as a decision taken to meet state budget targets without adequately assessing its potential economic impact on the tourism industry.

Mohamed called on Parliament’s Public Accounts Committee to immediately review the eighth amendment to the GST Act.

His request comes as overseas tour operators and travel agents have also raised concerns over the changes. Industry stakeholders have warned that the additional tax burden could lead some overseas businesses to reduce Maldives sales or shift their focus to competing destinations.