The government has submitted three crucial bills to the Parliament aimed at increasing taxes in the tourism sector and airport-related fees, as part of efforts to restore financial sustainability and manage growing debt burdens.
One of the key proposals is to amend the Goods and Services Tax Act, which would see the Tourism Goods and Services Tax (TGST) rise from 16% to 17% starting June 2025. West Maafannu MP Mohamed Musthafa Ibrahim sponsored the bill, with the government projecting that this increase could generate MVR 201.9 million in revenue next year. The bill cites the need to improve the state’s finances as the main driving factor behind the proposed hike.
The second bill, sponsored by South Mahchangolhi MP Musthafa Hussain, seeks to amend the Tourism Act by doubling the Green Tax levied on tourists. Under the new provisions, establishments currently charging USD 6 per day would see the rate increase to USD 12 per day, while those charging USD 3 per day would raise it to USD 6 per day. This change is expected to bring in MVR 963.6 million in additional revenue next year.
In addition to the tourism-related tax increases, the government has also submitted a bill to amend the Act on Tax Levied on Outbound Travellers at Maldivian airports. Sponsored by Gemanafushi MP Asadhulla Shihab, this bill proposes significant increases to the Departure Tax for foreign travellers starting in December 2025. Foreigners flying in economy class would see their tax rise from USD 30 to USD 50, while business class passengers would face an increase from USD 90 to USD 120. The largest increase is proposed for those flying in first class or on private jets, with rates rising from USD 90 to USD 240 and USD 120 to USD 480, respectively. The bill also seeks to raise the Airport Development Fee by the same amounts, with MVR 769.5 million projected from Departure Tax and MVR 809.8 million from the Airport Development Fee.
These tax hikes come as the Maldives faces challenges in managing its debt. The World Bank recently raised concerns over the government’s delays in implementing necessary reforms. The proposed tax increases are seen as part of an effort to stabilise state finances in the face of mounting financial pressures.
However, these changes are likely to have significant implications for the tourism industry, which is a key pillar of the Maldivian economy. The increase in taxes, particularly the doubling of the Green Tax, may affect the affordability of holidays in the Maldives, potentially deterring budget-conscious tourists. Additionally, the rise in airport taxes could increase travel costs for tourists, further impacting the sector.
The government has already faced criticism from industry stakeholders following the recent introduction of regulations mandating that all tourism-related revenue be deposited into local banks, a move that has stirred concerns over operational constraints and financial control. With the tourism sector bearing the brunt of these reforms, there are concerns about the potential impact on the country’s competitiveness as a top tourist destination.
As the bills move through Parliament, the tourism sector will be watching closely, particularly to understand the long-term effects on visitor numbers and the broader economy. The government, meanwhile, continues to seek solutions to its growing debt, balancing financial recovery with the potential impact on the country’s primary source of revenue.
