PNC lawmaker Thariq calls for postponement in TGST hike

Ahmed Thariq (Tom), a lawmaker from the main ruling People’s National Congress (PNC), called for the implementation of the planned increase in the Tourism Goods and Services Tax (TGST) to be postponed on Wednesday, suggesting that June next year was “too soon.”

The government has submitted three bills to the Parliament seeking to double the Green Tax and raise the TGST the Airport Departure Tax and the Airport Development Fee.

All three bills are being reviewed by the Whole House Committee.

Speaking during a committee meeting on Wednesday, Thariq said it has only been one year and nine months since the TGST was raised from 12 percent to 16 percent.

“I want to highlight one point. June 1 is a very short a notice period to increase a tax, especially one on businesses. I am in favor of postponing it to October 31, 2025,” he said.

Thariq said that resorts and operators sign yearly contracts, that usually expire or are renewed on December 31 or October 31.

“An increase in taxes in the middle of a contract, whether its Green Tax or TGST, will result in difficulties for businesses,” he said.

Thariq noted that the last TGST hike was implemented on January 1, 2023, which he said resulted in “havoc” in tax declarations by businesses.

“If you look at the statistics, you’ll see the revenue collected by MIRA [Maldives Inland Revenue Authority] in January 2023 was lower compared to January 2022, despite the fact that the TGST was increased from 12 percent to 16 percent in 2023. The tax rate was 12 percent in 2022. Even the tourist arrivals in Q1 2023 were higher than the previous year, but the revenue collected by MIRA was lower,” he said.

Thoriq said that many businesses had declared taxes in December when asked to declare it in one month, resulting in lower revenue collection. He warned that the same situation may arise with such a short notice for the increase in taxes.

He proposed changing the date of implementation of the tax hike from June 1 to October 31.

Meanwhile, Thulusdhoo MP Ibrahim Naseem suggested conducting a study to determine which two methods would be most effective; increasing TGST from 16 percent to 17 percent or regularize tourism businesses that currently operate outside of the system.

He suggested engaging in a debate on the issue.

A number of lawmakers supported the two suggestions, including Velidhoo MP Mohamed Abbas, South Feydhoo MP Ibrahim Didi, North Thinadhoo MP Saudulla Hilmy, and South Hithadhoo MP Ibrahim Nazil.

But the committee did not take a vote on either of the motions. The bills were forwarded to a subcommittee. Speaker Abdul Raheem Abdulla said the any changes to the bills will be made during the review by the subcommittee.

The bill to amend the GST Act will see the TGST raised from 16 percent to 17 percent.

The change is set to take effect on June 1, 2025.

A second bill to amend the Tourism Act will see Green Tax doubled from USD 3 to USD 6 percent for guesthouses and from USD 6 to USD12 percent for resorts and city hotels.

It is set to take effect on January 1, 2025.

 And, a third one to amend the Airport Taxes and Fees Act will see the Airport Departure Tax and the Airport Development Fee raised from USD 30 to USD 50 for foreign ‘economy class’ passengers, from USD 90 to USD 120 for both local and foreign ‘business class’ passengers, from USD 90 to USD 240 for ‘first class’ passengers, and from USD 120 to USD 480 for passengers who depart of private jets.

The changes are designed to take effect on December 1, 2024.

The Finance Ministry estimates the tax hikes will boost revenue by nearly MVR 3 billion.