The Maldives Association of Travel Agents and Tour Operators (MATATO) has stated that this may not be the optimal time to implement an increase in Goods and Services Tax (GST) and Tourism Goods and Services Tax (TGST).
MATATO made this statement after the government announced the decision to implement to an increase of 2 percent in GST and nearly 4 percent in TGST. As such, the Minister of Finance of Maldives, Ibrahim Ameer on Tuesday announced that the government has made the decision to increase GST to 8 percent and TGST to 16 percent.
MATATO states that the association has been in dialogue with relevant Government Ministries, both individually and together with other Tourism NGOs in past few weeks regarding various discussions concerning the national deficit.
Highlighting that the Association acknowledges the challenges faced by the Government, especially due to the impacts of global fuel increases, inflation and global recession MATATO stated that they do acknowledge that the Government deficit continues to grow, income, including tax receipts, is inadequate to cover its expenditures.
Noting that proposals to increase tax revenue through increasing the GST and TGST were presented during discussions, MATATO highlighted that the association does not believe that this is the optimal time to implement an increase in the GST and TGST, especially not without taking into consideration the full implications of this implementation, including it impact on the nation’s primary revenue generating sector, tourism.
MATATO highlighted that Tourism accounts for 74 percent of the gross national income and should be properly accounted for. Stating that all the competing beach destinations have opened their borders, MATATO noted the importance of staying competitive. This is especially true for the SMEs of Guesthouses and Liveaboards, as well as for budget resorts.
Any price increases will magnify the existing negative impact of fuel increases on operations, air travel, and, most of all, demand for the Maldives’ products, highlights MATATO. As such, the association noted that any implementation must include a sufficient the grace period to accommodate the vast majority of tourism industry stakeholder practices, which is to create contracts with rates extending up to two years in advance.
MATATO stated that neglecting industry needs and not adopting a gradual approach will have a severe impact on accommodation contracts with tour operators, given that rates for 2023 in most properties have already been published.
They also urged the government to implement austerity measures as a way of reducing its expenditure, deficit and debt rather than crippling its most productive sector.
The association highlighted that austerity serves as a stabilizer that can help avoid a debt crisis through a significant reduction in government spending. They stated that increasing taxes as a primary vehicle of revenue generation stifles economic growth and prosperity without contributing to controlling public sector debt.
