Businesses exporting goods to the Maldives will not be included when the destination principle is implemented, the Ministry of Finance and Public Enterprises has said.
The destination principle is a system under which GST is imposed on goods or services at the place where they are sold or purchased.
A bill submitted to Parliament to amend the Goods and Services Tax Act proposes establishing rules for collecting GST on the value of goods and services supplied to offshore booking platforms, foreign tour operators and travel agents.
Speaking on PSM News’ 'Raajje Miadhu' programme about the implementation of the destination principle, Deputy Minister for Finance and Public Enterprises Enterprises and Chairperson of the MIRA Board Ahmed Saaid Musthafa said introducing the destination principle in the Maldives was not a sudden decision. He said several days had been spent reviewing the reforms required under technical advice from the International Monetary Fund (IMF).
He stressed that introducing the destination principle did not mean imposing an entirely new tax. He said the proposed amendments were aimed solely at bringing revenue from the tourism industry into the Maldives’ tax system that currently does not enter it.
“If it is fully implemented, some changes may be introduced that would place a burden on Maldivian end consumers. However, the policy of the current government is to introduce changes to the tax system in a way that brings in GST revenue that is currently not being collected by involving an external party. Since the remaining components of the destination principle could place a tax burden on Maldivian citizens, we are proceeding in line with the commitments made in the policy,” Saaid said.
Speaking on the same programme, MIRA Assistant Commissioner General Mohamed Ali Waheed said the authority was prepared for the legislation to be passed by Parliament. He said changes would be made to the system and relevant procedures would be established.
He noted that other countries had initially faced challenges when implementing the system, but said it was now a policy being implemented in countries around the world and that major businesses were already accustomed to it.
“Once the entire system began to be implemented in other countries, those issues disappeared. Although there was resistance, particularly on platforms such as Amazon in some major countries, they are now implementing it. However, the current bill does not mention e-commerce platforms. It only covers inbound tourism products, and those would come under the scope of the bill through offshore booking platforms and tour operators,” Waheed said.
MIRA said it was preparing to implement the proposed changes. The authority also said it would make the necessary changes to its systems for tax collection and establish comprehensive procedures and regulations once the bill becomes law.