Foreign tour operators and travel agents marketing Maldivian resorts, hotels, and guesthouses have warned they may boycott the Maldives and promote alternative destinations if the government proceeds with plans to tax their profit margins under a shift to the "destination principle" for tourism taxation.
These concerns were raised during an online webinar hosted jointly by relevant government ministries and the Maldives Inland Revenue Authority (MIRA) to discuss recent amendments to the GST Act. The session, attended by over 600 participants from across the globe, saw a majority of attendees express strong opposition to the proposed changes.
Participants told Adhadhu that the meeting detailed the regulations surrounding the destination principle—which determines the tax jurisdiction based on where goods or services are consumed—and how bookings made prior to the first of next month would be handled. However, as these details were presented, participants voiced resistance to the measures.
The biggest concern for most participants was the issue of double taxation. Intermediaries selling Maldivian tourism products noted that they currently send tourists to the Maldives with T-GST and Green Tax already factored into their retail prices.
While these prices include their profit margins, the government now intends to tax this markup. Participants argued that since they already pay taxes on these profits in their home countries, a further 17 percent tax in the Maldives would constitute double taxation.
"I regret to say that I cannot support this. You are attempting to tax a service we provide outside of the Maldives. This margin is an amount on which we must pay tax in our own country. As a tour operator, this is the end of selling the Maldives," said an operator named Katharina.
Another travel agent remarked that taxing their profits is not standard practice in any other country. Supporting this view, another participant noted that destinations such as the Seychelles, Saudi Arabia, and Fiji do not impose such taxes, adding that they would pivot to selling those destinations if the Maldives implements this tax.
"With this new tax, you will sink the Maldives before sea levels do. Our tour operation will remove the Maldives from the list of destinations we have sold for 30 years and take our clients to easier, more affordable destinations," said a participant named Mary.
Even those participants who did not fundamentally oppose the tax expressed frustration over the short notice provided for the implementation. Several European tour operators pointed out that European consumer laws prohibit charging customers additional fees for bookings already sold, meaning the tax burden would have to be covered out of their own pockets.
Local guesthouse businesses have previously expressed similar concerns regarding the shift to the destination principle. They warned that such a move could introduce further challenges at a time when the tourism industry is already facing significant pressure.
