Destination Future, a tourism advocacy group, has called on the government to suspend the planned increase of the mandatory foreign currency conversion requirement to 40 percent starting next month, as well as the implementation of the destination principle for taxing foreign tour operators and travel agents.
In a position paper submitted to the government, Destination Future expressed concern that these changes are incompatible with the current state of the tourism industry. The organization described the measures as having the potential to cause "irreparable damage" to the sector.
The paper outlines six facts policymakers must consider, including the challenges faced by resorts, the concerns of international operators and agents, and the practical barriers to implementing the proposed changes.
According to the organisation, the biggest challenge currently facing resorts is declining occupancy. Statistics show that occupancy rates fell from 69.1 percent to 64.9 percent between January and June of this year.
Destination Future noted that supply pressure is set to increase as 165 resorts currently under development are completed and more beds enter the market. The group emphasised that this increase in supply must be met with demand.
The supply chain driving this demand includes foreign tour operators, wholesalers, online travel agencies, travel advisors, airlines, and charter operators. These entities take risks by investing in marketing, technology, and customer acquisition to bring tourists to the Maldives.
The advocacy group highlighted that after incurring these costs, requiring agents and operators to pay an additional 17 percent from their slim profit margins places an undue burden directly on them. Destination Future noted that international bodies representing these stakeholders, along with the Maldives Association of Travel Agents and Tour Operators (MATATO), have voiced serious concerns.
"Major industry bodies are already warning us. DRV, ABTA, ECTAA, and MATATO have all expressed their concerns. ABTA and ECTAA have requested a delay in implementation and the establishment of transitional arrangements for business already sold," Destination Future stated.
The organization also questioned the government’s financial projections and the estimated administrative costs of implementing the tax. While the government anticipates an additional MVR 1.6 billion in annual revenue with an administrative cost of just MVR 5.1 million, Destination Future argued that the tax base, compliance, and collection estimates must be published and stress-tested.
Warning of the long-term impact, Destination Future described the potential fallout as a "silent, irreversible" loss. They explained that while operators might not publicly announce a withdrawal from the Maldives, they would likely shift their business focus to competing destinations.
While calling for an immediate suspension of these measures, Destination Future clarified that it does not oppose the changes in principle, provided they are introduced through a more structured and well-planned approach.
Destination Future is comprised of prominent Maldivian professionals and industry experts. Their submission to the government provides a detailed technical rationale as to why the current measures are considered unsustainable.
Resorts and travel businesses continue to voice alarm over the changes, which they argue will create further hurdles for the industry. During a recent information session, some tour operators and travel agents warned that they might stop promoting the Maldives altogether.
