Government revenue in December falls below forecast

Government revenue in December falls below forecast
January 13 18:49 2016

Revenue collected by the tax authority in the final months of 2015 fell below forecasts as anticipated income from tourism and foreign investments failed to materialise last year.

According to the Maldives Inland Revenue Authority, total revenue collected in December was 9.7 percent below forecast and 2.4 percent less than December 2014.

“A 9.7 percent shortfall in revenue collection for December 2015 compared to the projection was observed for green tax, tourism sector [goods and services tax] and airport service charge. This is due to the 14.5 percent lower-than-expected tourist arrivals in November 2015,” MIRA explained in its December revenue collection report.

But according to the tourism ministry, tourist arrivals in November had registered a marginal growth of 0.5 percent despite a short-lived state of emergency and continuing political instability.

However, the occupancy rate at resorts had declined steadily in 2015, falling on average from 81.6 percent in 2014 to 76.5 percent with a corresponding fall in the average duration from 6.1 days to 5.7 days.

President Abdulla Yameen’s declaration of an unprecedented 30-day nationwide state of emergency in early November – which was lifted just six days later – had prompted concern from tour operators and industry insiders following bad press and bookings cancellations.

Despite citing threats to national security posed by missing weapons and explosives, the government had insisted that the Maldives was safe for tourists.

According to MIRA, November’s revenue was also 7.6 percent below forecast, but 4.7 percent higher than the same period in 2014.

Income from GST both from the tourism sector and the general public accounted for nearly half of government revenue in 2015.

In December, GST receipts accounted for 44 percent of total revenue, followed by tourism land rent (27 percent), business profit tax (7.4 percent), and the newly introduced green tax (4.8 percent).

In 2015, MIRA collected a total of MVR13 billion in revenue, up from MVR11 billion the previous year.

Along with import duties and other non-tax revenue, the government had expected to earn MVR21.5 billion last year.

But Finance Minister Abdulla Jihad told MPs in November that the revised figure was MVR17.7 billion.

Despite failing to realise some US$100 million as acquisition fees from investments in Special Economic Zones by August 2015, the government once again hopes to raise MVR1.5 billion (US$100 million) from SEZs this year.

During the parliamentary debate on the record MVR27.4 billion (US$1.7 billion) state budget for 2016, opposition MPs had criticised a raft of proposed revenue measures – which aim to generate MVR4 billion in additional revenue – as “unrealistic.”

The government had also revised its forecast for economic growth in 2015 from 8.5 percent to 4.8 percent.

Jihad said one of the reasons for the slower growth rate was lower than expected tourist arrivals. The government had forecast 1.4 million arrivals, but Jihad had said the figure is likely to reach 1.25 million by the end of the year.

In November, arrivals from China – currently the largest source market for the Maldives with a 30 percent market share – fell sharply by 19.7 percent. The tourism ministry attributed the fall to the suspension of direct charter flights from China.

As of November 2015, Chinese arrivals had fallen by 0.6 percent in 2015 compared to the previous year.

Arrivals from France and Russia meanwhile fell by 19.1 percent and 29.8 percent, respectively, compared to November 2014.

The tourism ministry suggested that arrivals from France decreased to the terrorist attacks in Paris, whilst long-haul travel has declined in Russia following the weakening of the country’s economy.

Statistics for December have not been made public yet.