Under the amendments to the Goods and Services Tax Act (GST Act) last year, the TGST on tourism businesses will be increased to 17 percent starting next month.
The increase in TGST came as the parliament changed some laws related to the tourism industry to increase revenue for the government. In addition to TGST, airport departure tax, airport development fee and green tax were also increased.
The government estimates that the TGST hike will generate an additional MVR 219 million this year. The government expects to receive an additional MVR 330 million and MVR 538 million next year.
Government MPs argued that the changes must be made to increase revenue, with the majority leader Inguraidhoo MP Ibrahim Falah insisting that the change should be brought even if the tourism businessmen do not agree.
The opposition Maldivian Democratic Party (MDP) opposed the increase in TGST and other tourist-related taxes. MDP MPs said the government was unable to cut spending amid failed fiscal policies.
"I am sure that the number of tourists coming to this country, arrivals will be greatly reduced due to the tax increase. The neighboring countries will benefit from this. They are applauding now," minority leader Hithadhoo South MP Ibrahim Nazil said.
Tourism businesses expressed concern as the tax hike could discourage tourists from visiting the Maldives.
“Our members and numerous stakeholders in the tourism industry continue to share with us their serious concerns regarding the scale of the proposed tax increases and the proposed short timelines for implementation of these reforms,” said the Maldives Association for Tourism Industry (MATI) in a letter to the parliament.
The tax hikes contravene President Dr. Mohamed Muizzu's pledge not to increase any taxes. But the government now claims the pledge was about taxes on the general public.
According to the latest statistics released by the Tourism Ministry, more than one million tourists have visited so far this year. This is about nine percent more than the same period last year.
The government aims to attract 2.3 million tourists this year. This is 300,000 more than last year. Last year saw two million tourists visit for the first time in the country's history.
