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New Year brings new Tourism Tax to Maldives

The New Year has potentially ushered in a new era for the Maldives’ lucrative holiday market as a Tourism Goods and Services Tax comes into effect placing an additional charge of 3.5 per cent on a host of services supplied by the country’s travel industry.

The new tax is levied on a wide of services; from room rates at resorts, guest houses and liveaboards, to tourist vessel hire and the cost of food and drink, diving schools and domestic transportation.

Speaking recently to the Agence France-Presse (AFP) service, acting Finance Minister Mahmood Razee claimed that the implementation of the new tax represented a government strategy aiming to roll out more direct national funding from Maldivian industries, where operators like resort owners have not previously been required to pay profit or income tax.

“It will gradually be extended to other [business] sectors… to reduce relying on indirect taxes, especially import duties that hurt the poor,” Razee told the AFP.

Mohamed Maleeh Jamal, Secretary General for the Maldives Association of Travel Agents and Tour operators (MATATO), said that as an organisation, it was not against a service tax within the travel market, yet he claimed that concerns existed how the funds would be implemented.

“We as MATATO have concern over the negative impact there may be from the tax on local travel agents in the Maldives, which unlike other travel markets, has no law protecting [domestic] operators,” he told Minivan News. “This can make it hard to be competitive when foreign operators are also working directly with resorts and the industry to obtain strong value.”

Pointing to key travel markets like the UK that have themselves last year instigated amended departure taxes such as an Air Passenger Duty (APD), Jamal said he believed there was international industry concern over the “Maldives becoming a more expensive destination”. He claimd that the taxation developments could hamper the country’s competitiveness against other holiday hotspots.

However, the MATATO Secretary General said that the association did not have issues with the actual figure of 3.5 per cent being added to services in itself and remained positive that MPs would still be able to help try and alleviate some industry concerns over the new tax rates.

“We are hoping we can discuss measures with parliament that will help protect local travel agents,” he said.

With the new rates in place as of today, Jamal said that the industry had already begun working with tax authorities to ensure its members and the wider travel industry understood how to deal with the new system.

“Some of our [travel] agencies have not quite been clear on how the tax works,” he said. “It takes time to become familiarised with such a new system.”

In looking back, 2010 had be seen as providing a positive turnaround in visitor figures.

Official statistics from the Ministry of Tourism, Arts and Culture released in November reported year-on-year visitor growth of 21.8 for the first ten months of the year.

Between January to October 2010, the official ministry figures showed that 63.3 percent of visitors to the Maldives came from European markets. Asia Pacific territories contributed 32.3 percent of overall travel demand to the country during the same period.

Publication of the figures followed a period of turbulence for the tourism industry towards the end of the year generated by media coverage of a video recording of a ‘false wedding’ conducted at the Vilu Reef Resort and Spa. Footage leaked onto video sharing sites like Youtube depicted some staff members mocking a Swiss couple in the local dialect of Dhivehi during a vow renewal ceremony being leaked online. The incident garnered both local and international coverage.

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