Several MPs of the ruling Progressive Party of Maldives have opposed the government’s plans to introduce a US$25 Airport Development Charge for Maldivians flying out of the Ibrahim Nasir International Airport.
The ADC, to be levied on all passengers, is among a raft of new taxes proposed in the 2017 state budget to raise MVR2 billion (US$130 million) in additional revenue.
In the face of widespread criticism after the finance minister presented the budget on Tuesday, Majority Leader Ahmed Nihan said only tourists and expatriates would have to pay the ADC.
2017 ge Budget Gai Aamdhanee ithurukurumah Airport Development Charge negumah visnaafaivanee Fathuruverinnaai Bidheyseenge Athun.
— Ahmed Nihan (@ahmed_nihan) November 8, 2016
But President’s Office Minister Ahmed Zuhoor told the parliament’s budget review committee today that the cabinet’s economic and youth council decided to impose the charge on both domestic and international passengers departing from INIA.
“The ADC of US$25 doesn’t include any exemptions,” Zuhoor said.
However, he added, MPs could exempt Maldivians as the ADC would have to be introduced through new legislation.
“You will have to decide in a separate law from whom it will or not be taken. When the budget was formulated, my thinking as the chair of the economic and youth council was to take the [ADC] from everyone,” he said.
Responding to Zuhoor, PPM MP Asma Rasheed said lawmakers will be “forced to take the people’s side” and reject the ADC proposal.
PPM MP Riyaz Rasheed also declared that the ruling coalition’s lawmakers will not support imposing the ADC on Maldivians.
Opposition MPs on the committee concurred with the deputy leader of the ruling party’s parliamentary group.
Jumhooree Party leader Gasim Ibrahim said Riyaz’s remarks amount to a repudiation of the cabinet team that drafted the budget.
“I think this is a suggestion of a no-confidence vote against the economic council. This is regrettable,” said the business tycoon, who recently threw his support behind former President Maumoon Abdul Gayoom in the ruling party’s civil war.
Minority Leader Ibrahim Mohamed Solih meanwhile warned that imposing the ADC for tourists on top of the existing US$25 airport service charge for foreign passengers would “adversely affect the economy.”
Maldivian passengers currently pay a US$12 airport service charge. The ADC would lead to an MVR385 hike in ticket prices for travel within the Maldives.
Responding to the criticism. Zuhoor insisted that the new revenue-raising measures cannot be revised as they are necessary to pursue the government’s ambitious development agenda.
The ADC will be used to finance the INIA expansion project, he said. President Abdulla Yameen unveiled plans to develop the airport with US$800 million worth of foreign loans last April.
In his budget speech, Finance Minister Ahmed Munawar said proceeds from the ADC – an estimated MVR565.8 million next year – will be used to set up a “sovereign development fund” as a long-term fiscal reserve to repay debt.
The International Monetary Fund warned earlier this year that the Maldives is facing “a high risk of external debt distress” due to large increases in capital spending – including the China-Maldives Friendship bridge and the INIA expansion – which are entirely financed through external loans.
Zuhoor said the government will not withdraw from the fund for three years. The money will be invested to grow the fund, he added.
Indian developer GMR’s plans to introduce a US$25 ADC in January 2012 was a major point of contention that led to the cancellation of its concession agreement to upgrade INIA, despite GMR’s offers to exempt Maldivians.
A Singaporean arbitration tribunal ruled last month that the Indian infrastructure giant is owed at least US$250 million in damages for the abrupt termination of the airport development deal.
A report by the former auditor general had found that concession revenue paid to the government plummeted fourfold as a result of a civil court ruling that blocked the developer’s charging of the US$25 ADC, which was hailed by both the PPM and then-MP Yameen, who were in opposition at the time.