It’s another dossier for SETO, EDV and ECTAA that has come to the forefront in August.
The Maldivian government announced last month an expansion of the Tourism Goods and Services Tax (TGST) to foreign travel operators.
The Maldivian tax administration, the Maldives Inland Revenue Authority (MIRA), has indeed drafted a new measure that has provoked a global uproar among tour operators worldwide.
It provides for taxing at 17% the producers, agencies, OTAs or other foreign companies that assemble accommodation, transfers and other land-based services.
However, the TGST will not be levied on the entire price of the stay. The taxable base roughly corresponds to what remains for the tour operator after deducting the amounts paid to Maldivian suppliers. In other words, the tax effectively targets the margin that professionals make on the package.
The Maldivian government announced last month an expansion of the Tourism Goods and Services Tax (TGST) to foreign travel operators.
The Maldivian tax administration, the Maldives Inland Revenue Authority (MIRA), has indeed drafted a new measure that has provoked a global uproar among tour operators worldwide.
It provides for taxing at 17% the producers, agencies, OTAs or other foreign companies that assemble accommodation, transfers and other land-based services.
However, the TGST will not be levied on the entire price of the stay. The taxable base roughly corresponds to what remains for the tour operator after deducting the amounts paid to Maldivian suppliers. In other words, the tax effectively targets the margin that professionals make on the package.
It’s Completely Unreal, It Makes No Sense
A move that set off a wave of indignation among tour operators and travel operators alike.“They are asking us to fold into our prices a tax equal to 17% of the margin earned on the land-based services sold to the Maldives for a given file. In other words, it’s incomprehensible, because we don’t know our margins before selling. Moreover, our margins do not apply only to the land portion, but also to the air component,” explains Patrice Caradec, president of SETO, a touch irate.
“It’s absurd, continues Hélion de Villeneuve, chief executive of Austral Lagons. They could have raised entry fees, the e-visa, or the local taxes on hotels and services. That would have been passed on to us automatically, and it would have been much simpler. If they need money, we can understand that.
But now they’re asking us to register on a site, to declare the margins we make on the destination and, on those margins, they will take 17%. This is utterly unreal, it makes no sense.”
SETO, EDV and ECTAA Have Written to Maldivian Tax Authorities
SETO, along with the Voyage Companies (Entreprise du Voyage) and ECTAA, thus penned a letter to the Maldivian authorities, and to the tax services handling this file. A letter that essentially went unanswered.
« We explained to them that their regulation is unintelligible and cannot be implemented in these terms. This cannot be done overnight.
We asked for a meeting to try to imagine an alternative arrangement.» details Patrice Caradec, who adds: « It’s utterly crazy: they’re asking us to provide the purchase prices of hotels and the selling prices of hotels. But we don’t sell hotels; we sell packages. We could pretend we don’t margin on hotels, only on the flight ticket. That would be ridiculous. »
Tour operators and Maldivian producers must therefore register on an online platform before September 30, something that French tour operators as a whole have rejected, according to Patrice Caradec.
« We asked our members what their position was and who intended to register on the platform. It is clear that, across Europe, not a single operator is registering. » specifies the SETO president.
« We explained to them that their regulation is unintelligible and cannot be implemented in these terms. This cannot be done overnight.
We asked for a meeting to try to imagine an alternative arrangement.» details Patrice Caradec, who adds: « It’s utterly crazy: they’re asking us to provide the purchase prices of hotels and the selling prices of hotels. But we don’t sell hotels; we sell packages. We could pretend we don’t margin on hotels, only on the flight ticket. That would be ridiculous. »
Tour operators and Maldivian producers must therefore register on an online platform before September 30, something that French tour operators as a whole have rejected, according to Patrice Caradec.
« We asked our members what their position was and who intended to register on the platform. It is clear that, across Europe, not a single operator is registering. » specifies the SETO president.
The Protest Extends Beyond European Tour Operators
Activated on the dossier since the end of August, ECTAA continues to press the Maldivian finance and tourism ministers to demand an urgent postponement of the October 1 deadline.
The association laments a deficient preparation by local authorities, unable to provide clear answers to industry questions.
For Eric Drésin, secretary-general of ECTAA: “Faced with a tax reform of such complexity imposed within untenable deadlines, we are maintaining pressure on the Maldivian authorities, while ensuring active coordination with our members and the WTAAA international association.
All tour operators and distributors working with the Maldives denounce an undue administrative burden and clear risks of double taxation. We could not be clearer.”
Indeed, the challenge is not confined to French tour operators. In India, for instance, the Outbound Tour Operators Association of India (OTOAI) has also urged the Maldivian government to review and withdraw this provision, according to Travel Trade Journal.
In Germany, the Deutscher Reiseverband (DRV) is calling for a postponement of the measure. The organization notes that the legal basis was adopted only on August 31, with an effective date planned for October 1, even though operators market and price their programs several months in advance.
In the United Kingdom, the Association of British Travel Agents (ABTA) has also stepped forward. The professional association has written directly to the president of the Maldives to request at least a six-month postponement of the application of the new tax, in order to allow for genuine consultation.
The association laments a deficient preparation by local authorities, unable to provide clear answers to industry questions.
For Eric Drésin, secretary-general of ECTAA: “Faced with a tax reform of such complexity imposed within untenable deadlines, we are maintaining pressure on the Maldivian authorities, while ensuring active coordination with our members and the WTAAA international association.
All tour operators and distributors working with the Maldives denounce an undue administrative burden and clear risks of double taxation. We could not be clearer.”
Indeed, the challenge is not confined to French tour operators. In India, for instance, the Outbound Tour Operators Association of India (OTOAI) has also urged the Maldivian government to review and withdraw this provision, according to Travel Trade Journal.
In Germany, the Deutscher Reiseverband (DRV) is calling for a postponement of the measure. The organization notes that the legal basis was adopted only on August 31, with an effective date planned for October 1, even though operators market and price their programs several months in advance.
In the United Kingdom, the Association of British Travel Agents (ABTA) has also stepped forward. The professional association has written directly to the president of the Maldives to request at least a six-month postponement of the application of the new tax, in order to allow for genuine consultation.
