Maldives Association of Travel Agents and Tour Operators (MATATO) has revealed that if taxes are increased next year, there will be a 10 percent decline in the tourism sector.
According to a statement published by MATATO, a survey was conducted involving over 300 operators bringing tourists to the Maldives following the government's decision to increase TGST.
The survey results showed that if the prices of Maldivian tourism services is changed due to the tax increase, it will have an adverse impact on the country's economy.
The government has decided to increase GST from six percent to eight percent and TGST from 12 percent to 16 percent next year. The decision was welcomed by both the International Monetary Fund (IMF) and the World Bank.
MATATO said that although the Maldives had seen an influx of tourist arrivals within a short period of time after the borders reopened to all travelers on July 15, 2020; a rise in the prices of tourism sector services due to the increase in tax rates will have an impact on the country's economy.
This is because beach destinations such as Thailand, Bora Bora and Indonesia have now reopened their borders as well.
MATATO said the tax increase will affect SMEs in the tourism sector, stressing that guesthouse businesses will be severely hit. Therefore, the association has requested the government to change its decision of increasing taxes.
MATATO also met with an IMF team last week to share concerns regarding the tax hike.
MATATO said that the global economic downturn has begun to affect the tourism sector. The organization said that discounts ranging between 30 and 40 percent for rooms were offered during this year's summer season. According to them, a tax hike would make it difficult to offer such a huge discount for tourists.
MATATO has requested the government to take other measures to reduce government expenditure instead of increasing TGST.