The Economic Council has decided to withdraw the legislative amendment proposed by the government to reduce the land rent on islands leased for tourism.
The decision was announced by the Finance Ministry in a statement on Wednesday evening.
The government had submitted legislature to amend the Tourism Act in order to reduce the tourism land rent on March 29.
The Finance Ministry said on Wednesday that the global economy had been facing multiple adverse events this year, which was having an impact on the Maldives’ fiscal path, and changing projections.
The most significant event impacting Maldives is the Russia-Ukraine war, which is raising global food and fuel prices, said the ministry.
The Finance Ministry said that spending on subsidies had increased well beyond the projections on the 2022 budget.
Finance Ministry said that the Economic Council decided that based on Maldives’ current fiscal situation, the government cannot make any move that could result in loss of state revenue.
Tourism is Maldives’ biggest revenue generator, and fastest developing sector.
The Economic Council decided it was important to charge fair rent rates, that ensure the state receives a fixed revenue from tourism sector.
The decision follows concern from state institutions such as the Maldives Monetary Authority (MMA) and Maldives Inland Revenue Authority (MIRA).
MMA governor Ali Hashim, in a meeting with the Parliament’s Economic Committee on Tuesday, warned that reducing tourism land rent would have a significant impact on state revenue. He advised against making such a decision at this time.
“It is not advisable to do something that would reduce our revenue, at a time when we are experiencing the Ukraine conflict and other such supply shocks. The country [Sri Lanka] has gone to IMF over such an issue,” he said.
Meanwhile, Deputy Commissioner General of Taxation Asma Shafeeu told the committee reducing resort land rent would result in an MVR 590 million loss in projected state revenue.