MATI Chronicle Q2 2020

2012

1.Government approval of the extension of built up area extension in resorts to up to 30%.

This has been a key area of MATI’s lobby with the Government during the past decade. MATI felt that the relaxation of the built up area requirement will enable resort managements to provide better facilities both to guests and staff. It would also allow more flexibility and versatility in resort design and construction.

 

2.Meetings with the President and other high level authorities regarding the price hikes at the airport

For airlines at INIA, the rising costs at the international airport for flight operations and the passengers had been a matter of serious concern to MATI. The issue was raised with the former President Nasheed on 6 February of 2011. MATI had also been discussing with Ministers and other senior officials in finding ways to meet the challenge of high costs.

 

3.Working with Male’ City Council to tackle the issue of waste being dumped into the sea.

The problem of waste disposal had remained a constant challenge to the resorts,

especially those at a distance from Thilafushi. Resorts close to Thilafushi have also been subject to new regulations issued by the Male’ City Council, the operators of Thilafushi, set charges for bigger vessels based on the size of the vessel. MATI seeked to establish a uniform system of charges and services for Thilafushi. Nevertheless, the larger question of waste disposal for distant resorts still remains.

 

4.Discussion with the Government regarding its decision to include foreign staff in the retirement pension scheme.

MATI stressed that we did not believe it is a good idea to include foreign tourism staff in the Maldives pension scheme as already a lot of companies struggle to cope with the pension fund contribution for locals plus trying to help maintain the living standards enjoyed by the staff prior to the devaluation of the rufiyaa. Added costs and financial burden on the cash flow of tourist resorts would mean considerable difficulties for resort operators. We continue our lobby, both with the Pensions Authority and the Citizen’s Majlis to amend the Law on Pensions.

 

5.T-GST and BPT

1. a) MATI submitted a paper to the Government in 2011 highlighting the concerns and recommendations it had with the tax regime. Following is a summary of MATI’s recommendations and concerns.

T-GST

• Government proposed to increase T-GST to 15% in the budget for 2013.

• Our recommendation was to keep the present rate at 3.5% until the end of 2012 and then increase to a maximum of 7% from 1st January 2013.

• Notice of this intention should be circulated to the industry at least one year before the due date to collect the increased tax.

BPT

• Capital Allowance on Building 4% as per the BPT (Regulation 33). This should be changed to allow depreciation on the unexpired lease period of the land or 4%, whichever is higher.

• Valuation of assets/buildings at the commencement of the Act (Regulation 29 and 30). The value to be taken for the assets at the time of the commencement of the act should be higher of the written down value (book value) and the open market value considering the fact that a lower value will be unreasonable to taxpayer

• Deduction for cost of low value asset (Regulation 27). The exact amount defining the line between assets and expenditures should not be written in the act, but rather be determined from time to time (yearly e.g.) Recommended principle: low value assets rules as per GAAP = fiscal rules.

• Withholding Tax of 10% to be removed completely (section 6). Withholding Tax of 10% to be removed completely.

• Managerial Remuneration (section 11(c). Moreover it is not clear what happens in case there is a loss. The Directors are also working for the company and remuneration is paid to them for the purpose of earning income to the company, hence it would be inappropriate to restrict it. The restriction on managerial remuneration should be removed with Income tax for individuals

• Loss Relief (section 13). As a one time option the existing losses which are there on the date of commencement should be allowed and also carried forward for 5 years should be changed to 10 years.

• Bad Debts (Section 10(g). The bad debts incurred on debts created prior to the commencement of the Act should be allowed as a legitimate deduction since it is a genuine expense of the business entity.

• Interest Expenditure (Section 11(5). The interest paid other than financial institutions are restricted to 6%, which is unreasonable. Normally, the rates in the private market are more than the rates given by the financial institutions; it is illogical to keep the rates less than the financial institutions rate.

• Threshold for tax free profit (Sec.7). For tourism industry, the tax free allowance should be at least a minimum of USD 200,000

• Pension Payment (Sec. 10(d)(5) and Regulation 51). It would be better if the actual amount contributed is allowed as a deduction. The Pension Fund clearly indicates that any payment to the fund is Tax Deductible.

 

1. b) Members of the MATI Executive Board met with the President, Minister of Finance and senior officials from MMA conveying our concerns and recommendations on taxes and other tourism related issues

 

1. c) Members of the MATI board met with the Commissioner General of taxation regarding withholding tax.