New tax introduced on local tourism

New tax introduced on local tourism
June 29 20:59 2016

Tourists staying in guesthouses in the Maldives will be charged a tax of US$3 for each day of stay effective October 1.

The green tax on guesthouses was passed into law by the ruling Progressive Party of the Maldives dominated-parliament on Wednesday, despite opposition MPs and guesthouse owners warning that it would deter visitors to local islands.

The new tax, which comes on top of a 12 percent tourism goods and services tax, marks the government’s latest policy U-turn. When the tax was first introduced in 2014, then-tourism minister said he was exempting guesthouses in order to reduce the impact on small and medium businesses.

Tourists staying at resorts started paying US$6 as green tax in November last year

This week, the government had initially proposed levying the same figure on guesthouses, but revised the figure down to US$3 after an outcry from guesthouse owners.

Ahmed Karam of the Guesthouse Association of Maldives said that the lower amount will not have immediate effects on the nascent sector, but would cause damage in the long run. “Owners will start to have lower occupancies and they will make lesser profits. It is going to be a slow, painful debt,” he said.

The owner of Serene Sky Guest House on the island of Thoddoo said a campaign to reduce the tax burden on guesthouses had found support among some 200 out of 500 guesthouses in the country.

“For now, our stand is that we cannot afford to pay more taxes,” he said.

The campaigners have alleged that the taxes had little to do with the environment, noting there were no guidelines on how the tax is to be spent.

Environmental NGO, Bluepeace, posted on Facebook a picture of thick plumes of smoke from the rubbish island of Thilafushi where the country’s waste is burnt, observing that the government had failed to solve the problem despite collecting US$17.9million in green taxes this year.

Just as the PPM in 2014 defeated an opposition proposal to allocate green taxes for green initiatives, MPs from the ruling coalition voted on Wednesday to reject an amendment that suggested spending taxes received from an island on environmental projects in that island.

However, just hours before the vote, in an interview with newspaper Mihaaru, Tourism Minister Moosa Zameer said the aim of the green tax was to improve services on the islands.

“We want to find ways for the guesthouses to manage waste. At its most basic, we want to establish incinerating facilities. This is a huge thing that we want to do for those who run guesthouses,” he was quoted as saying.

Other amendments proposing a progressive tax between 0.5-2 percent rather than a flat rate was also thrown out.

It is for this reason that critics are alleging that the tax is aimed at plugging the government’s ballooning budget deficit. Still others have alleged that it was pushed through by hoteliers who operate resorts on private islands. The tourism tycoons see guesthouse tourism as a threat, they said.

Another concern the guesthouse owners raised is that the increased tarrif would impact other businesses on local islands, such as shops, restaurants and dive centres, which are dependent on visitors for revenue.

Ahmed Habeeb, who owns six guesthouses across the Maldives, said: “It will be difficult for many of us to charge such a tax. Smaller guest houses may stop making enough money. Those building guest houses will have to stop. Some people have spent most of their life savings to invest in their guesthouses while others have taken huge loans.”

Zameer meanwhile pledged to do more for guesthouse tourism.

“We want to make sure [our actions] have the most minimal impact on the market,” he told Mihaaru, vowing to speak to booking portals to reduce booking fees and step-up government efforts to market the burgeoning sector.