A decision by the Maldives Government to extend the country’s 17% sales tax to overseas tour operators and travel agents has cost the country ‘millions’ in lost bookings, according to one hotelier.
ABTA has confirmed today that overseas tour operators will be removed from the Goods and Services Tax (TGST), but Mohamed Khaleel, Managing Director of Pules Hotels & Resorts, said the damage was already done.
The extension was announced in late August, and Mohamed said that bookings in September, when the hotel chain expects to take 20% of its revenue for the year, were down 30%.
Previously, Mohamed was a tourism advisor to the Maldives President, but resigned due to a disagreement over taxation.
“That (TGST) was a real blunder that the Government made,” he said. “It was not practical; you can’t impose a tax on foreign countries.
“We lost business from the UK and other European countries, including France, Germany and Italy during the peak booking period in September.
“Tour operators didn’t push the Maldives because of the tax, they pushed other destinations instead. We missed out; it has cost us millions.”
Today, Maldives Minister of Tourism and Civil Aviation Mohamed Ameen confirmed there will be an amendment to the TGST Act to remove overseas operators and agents with no fixed place of business in the Maldives, following a meeting with ABTA Director of Public Affairs Luke Petherbridge at WTM London.
“It was great to meet with Minister Ameen at WTM, and ABTA strongly welcomes the responsive approach adopted by the Maldives government on this issue,” said Luke.
“The Maldives has long been favoured by the travel trade and UK travellers as a premium long-haul destination, with around 200,000 visitors from the UK in a typical year.
“It is great that the Maldivian Government has recognised the value UK travel brings and acted swiftly to address the concerns expressed by ABTA, and the global travel trade.
“ABTA will stay in touch with the Maldivian authorities and will share with members all updates from MIRA, the Maldivian tax authority, to ensure anti-avoidance measures and refund processes are understood.”
Minister Ameen said: “The destination principle was introduced to ensure greater fairness in our tax system. Our decision to repeal it reflects an equally important commitment: listening to the industry, protecting our competitiveness and maintaining the confidence of our international partners.
“We will continue to listen, engage and work closely with our industry partners to strengthen the long-term success of Maldives tourism.”
The tax came into force on 1 October, at a time when hotels in the Maldives were already struggling due to the conflict in the Middle East, which has deterred visitors flying via major hubs including Dubai and Abu Dhabi.
“We have been impacted badly; 34% of Maldives’ tourists arrive on Middle East airlines and Europe’s direct carriers can’t fill that gap,” said Mohamed Kahleel of Pulse Hotels.
Hotel rates are down by 40%, with some hoteliers offering even deeper cuts, he said. “Revenue has been hit, but it is better to have people coming than no one on the island,” he added.
Arrivals are 7% down compared with the same time last year, but the UK market is up 7%, according to Mohamed.
Currently, only just over half the hotel rooms are full – and there is more capacity coming online, which Mohamed said was leading to ‘even more aggressive offers’.
Even though Pulse Hotels & Resorts has two new properties opening next year, boosting its inventory to six hotels in total, Mohamed is calling for a moratorium on further hotel expansion for at least the next five years to balance supply with demand.
“The Seychelles had a five-year moratorium; it’s been done before. And the Government and industry stakeholders need to make a concerted effort to increase demand,” he said.
