The Government has proposed changes to the tax framework in the 2025 budget, aiming to apply the destination principle to goods and services consumed in the Maldives. These changes are designed to enhance revenue and address issues related to the Goods and Services Tax (GST), particularly within the tourism sector.

Presenting the budget to Parliament, Finance Minister Moosa Zameer outlined several revenue-raising measures, including adjustments to tax and fee rates associated with tourism. These adjustments will involve increases in departure tax, airport development fees, and the Tourism Goods and Services Tax (TGST), all aimed at minimising the impact on the general public.

A key proposal is the introduction of the destination principle, an internationally recognised method that applies GST to all goods and services consumed within a specific jurisdiction. This reform is set to take effect in mid-2025. Zameer explained. 

"This change will apply TGST to tourism services provided by offshore travel agents and booking platforms," he said.

He highlighted that this shift would reduce GST-related discrepancies between local businesses and large international online companies, helping level the playing field for Maldivian firms competing against major overseas entities.

In addition to enhancing revenue, the budget prioritises expenditure reduction. The finance ministry indicated that measures would be implemented to expand the tax base, thereby improving fiscal stability.

The Government acknowledges that tourism is the Maldives' largest source of foreign exchange. However, significant portions of revenue from tour packages are currently charged abroad, limiting the taxable amount within the country.