Minister of Economic Development Fayyaz Ismail has stated that the proposed increase of the Tourism Goods and Services Tax (TGST) is too small compared to other countries similar to the Maldives.
The government has submitted an amendment bill to increase TGST from 12% to 16% and increase Goods and Services Tax (GST) from 6% to 8%. The changes are proposed to be implemented in January 2023.
Speaking to PSM News, Minister Fayyaz said other countries that are at the same level of income have an average TGST of 16% and so the tax hike would not affect tourist arrivals to the Maldives. He alleviated the concerns of guesthouse operators by saying that tourists who are willing to spend USD5,000 would not stop visiting because they have to pay an extra USD50 dollars. He assured that the effect on guesthouses would be minor due to the tax hike.
Speaking about the reason for increasing taxes, Minister Fayyaz highlighted the global rise in fuel prices that led to the increase in government expenditure on electricity subsidies. He said tax hikes are the only way for the government to continue providing subsidies, noting that the government has drastically reduced its duty fees as part of the changes.
Furthermore, Minister Fayyaz said the proposed tax hike shows that President Ibrahim Mohamed Solih is willing to do what it takes for the future of the country, adding that any administration that assumes power in 2024 would be compelled to make the same changes.