Timing not optimal to increase GST and TGST – MATATO

The Maldives Association of Travel Agents and Tour Operators (MATATO) has expressed concern over government plans to increase the Goods and Services Tax (GST) and the Tourism Goods and Services Tax (TGST).

In a press statement issued Tuesday, 6 July 2022, the Association acknowledged the challenges faced by the Government, especially due to the impacts of global fuel price increases, inflation and global recession.

“We acknowledge that while the Government deficit continues to grow, income, including tax receipts, is inadequate to cover government revenue requirements.”

The relevant government ministries have revealed they are in discussion with various parties including tourism sector players on how best to manage the shortfall in meeting government expenses. While no specific implantation date has been mentioned, the discussions have highlighted a plan to increase GST and TGST as measures to be taken in meeting government’s expenditure requirements.

“MATATO believes this may not be 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 its impact on the nation’s primary revenue generating sector: tourism,” MATATO’s statement said.

“Tourism accounts for 74% of the gross national income and should be properly accounted for. As all the competing beach destinations have opened their borders, it is important to stay 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 price increases on operations, air travel, and, most of all, demand for Maldives’ products.

“Any implementation must include a sufficient 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. 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.

“Rather than crippling its most productive sector, the Association requests that Government implement austerity measures as a way of reducing expenditure, deficit and debt. Austerity serves as a stabilizer that can help avoid a debt crisis through a significant reduction in government spending. Increasing taxes as a primary vehicle of revenue generation stifles economic growth and prosperity without contributing to controlling public sector debt.

“This is an opportunity for the Government to restructure its spending to be less wasteful, especially when concerning subsidies, public sector investment projects (PSIP), competitive bidding on infrastructure projects, recurrent expenditure on political appointees, expenses of State Owned Enterprises (SOEs) and other expenses,” concluded the statement from MATATO.