The Maldives
Taxing new year
Travellers are going to be wishing that they had gone to visit the Maldives last year instead of this, with the Maldivian government having enacted a new 3.5 percent tax on various tourism-related services. This legislation, passed in August last year, represents an attempt to pull in more revenues from the tourist sector, which already contributes about a third of the country's gross domestic product. Finance Minister Muhmood Razee hopes the additional money will lessen the budget shortfall to 16 percent from the current 26 percent.
While many in the tourism business have expressed concern over the legislation, a sop was also thrown to the sector, with the lease period for renting out Maldivian islands – yup, full islands – for resorts having been extended from 25 to 50 years. The government has enlisted the help of the Inland Revenue Authority to help travel agencies better understand the new tax. In fact, the new levy is significantly less than in many other countries – the UK, for instance, taxes tourism services by a hefty 17 percent.
As a developing country that is heavily dependent on tourism, however, there are fears that overpricing will put off vacationers, and that the Maldives might not be able to compete with cheaper destinations. The most proximate competition, Sri Lanka, is set to attract tourists to the post-war country with a special 2011 offer. Thailand, too, is reducing prices to override the impact of political instability. In all of this, Maldivian tour operators believe that 3.5 percent tax is a significant hike.