MP Mohamed Abbas advocates cautious tax increases to protect Maldives tourism

On Tuesday, Velidhoo MP Mohamed Abbas advocated for a balanced strategy regarding the proposed increase in tourism-related taxes in the Maldives, stressing the importance of safeguarding the industry from potential disruptions.

Abbas, who serves as vice-president of the Maldives Development Alliance (MDA) led by businessman Ahmed Siyam Mohamed, voiced his views during discussions on the Progressive National Congress (PNC)’s proposed amendment to the Goods and Services Tax (GST) Act, which seeks to raise the Tourism Goods and Services Tax (TGST) by 17%.

While expressing his support for the government’s proposal, Abbas raised several concerns. He pointed out that global events, particularly ongoing conflicts, are impacting tourism in the region, including in neighbouring Sri Lanka. He warned that Sri Lanka’s economic recovery and enhanced tourism sector could pose a competitive threat to the Maldives.

“Tourism is the backbone of our economy,” Abbas stated, emphasising that abrupt increases in TGST, green tax, or airport tax could severely impact businesses, especially small and medium enterprises.

He highlighted the difficulties faced by guesthouses, noting that these establishments, already struggling, could be disproportionately affected by tax hikes. As an example, Abbas shared that guesthouses operated by his Sabba Travels and Tours in N. Fodhdhoo have experienced a decline in guests over the past four months due to global tensions, a stark contrast to the previous four years when their 33 beds were consistently occupied.

Abbas underscored the need to adjust the tax framework to meet the country’s economic challenges while ensuring foreign investors remain confident.

“If we need to raise taxes to support economic development and provide essential services, it should be done,” he asserted, adding that any tax increases should be carefully considered to avoid harming the tourism sector.

He also warned of the competitive nature of neighbouring countries in attracting tourists, which could further complicate the Maldives’ position.

Abbas expressed concern over a recent government directive mandating tourism companies to exchange $500 in banks, noting that this has led some resorts to pay salaries and service charges in Maldivian Rufiyaa instead of dollars. Although he did not disclose specific resort names, he mentioned that resort human resources departments have communicated this change to their staff.

Additionally, Abbas remarked on the common practice among resorts and guesthouses to offer complimentary meals and packages for children under 12 as a way to entice families. He cautioned that any tax changes and added fees could diminish the attractiveness of such offers, ultimately impacting tourist arrivals.

He concluded by emphasising the need for tax adjustments that reflect the realities of the tourism market, advocating for a thoughtful approach to ensure the industry’s continued growth and sustainability.