The Maldives Travel Agencies and Tour Operators Association (MATATO) said now may not be the optimal time to implement an increase in the Goods and Services Tax (GST) and tax. on tourism products and services (TGST).

MATATO made the statement after the government announced the decision to implement a 2% increase in GST and almost 4% in TGST. Thus, the Minister of Finance of the Maldives, Ibrahim Ameer, announced on Tuesday that the government had taken the decision to increase the GST to 8% and the TGST to 16%.

MATATO states that the association has been in dialogue with relevant ministries, both individually and with other tourism NGOs over the past few weeks regarding various discussions regarding the national deficit.

Emphasizing that the Association recognizes the challenges facing the government, particularly due to the impacts of global fuel increases, inflation and the global recession, MATATO said he recognizes that the government deficit continues to grow, that revenues, including tax revenues, are insufficient to cover its expenses.

Noting that proposals to increase tax revenue through the increase in GST and TGST were presented during the discussions, MATATO stressed that the association does not believe that this is the optimal time to implement an increase. GST and TGST, especially not without considering the full implications of this implementation, including its impact on the country’s main revenue-generating sector, tourism.

MATATO pointed out that tourism accounts for 74% of gross national income and should be properly accounted for. Stating that all competing beach destinations have opened their borders, MATATO stressed the importance of remaining competitive. This is especially true for SMEs of Guesthouses and Liveaboards, as well as budget resorts.

Any price increases will amplify the existing negative impact of fuel increases on operations, air travel and, most importantly, demand for Maldivian products, MATATO points out. As such, the association noted that any implementation must include a sufficient grace period to accommodate the vast majority of tourism industry stakeholder practices, which is to create contracts with fixed fares. extending up to two years in advance.

MATATO said neglecting industry needs and failing to adopt a phased approach will have a big impact on accommodation contracts with tour operators, given that rates for 2023 at most properties have already been announced. been published.

They also urged the government to implement austerity measures as a means of reducing its spending, deficit and debt rather than crippling its most productive sector.

The association pointed out that austerity serves as a stabilizer that can help avoid a debt crisis through a significant reduction in public spending. They said raising taxes as the main vector of revenue generation stifles economic growth and prosperity without helping to control public sector debt.