Opposition leader and Maldivian Democratic Party (MDP) Chairperson Fayyaz Ismail has criticised the Muizzu government’s proposed amendment to the Special Economic Zones (SEZ) Act, warning that it will cause major losses to state revenue and create unfair advantages for specific tourism projects.
In a post on X, Fayyaz, who also served as the Minister of Economic Development under the MDP government, said the amendment introduces “tax breaks for selected projects in the highly lucrative tourism sector.”
“The proposed amendment to the SEZ bill will be very detrimental to the tourism industry and will have a huge loss of potential revenue to the state as it introduces tax breaks for selected projects in the highly lucrative tourism sector,” he wrote.
He said the project identified by President Mohamed Muizzu as a “Sustainable Township” was initially secured in December 2022 during the MDP administration as a regular tourism development without any special concessions.
“The decision to suddenly grant unfair concessions only for a specific project brings into question the government’s intentions,” Fayyaz said, adding that tourism development in Noonu Atoll “does not need tax incentives to attract investors.”
Fayyaz also noted that the previous MDP government had proposed a four percent property transfer tax to apply across all tourism real estate sales through an amendment to the Tourism Act submitted to the Parliament on 19 June 2023. The current administration, he said, later withdrew that amendment in November 2023.
“The government’s nefarious intentions are laid bare by their proposal to implement this for only selected projects rather than letting the entire sector benefit from this,” he said.
According to the proposed SEZ amendment, areas designated as “Sustainable Townships” will receive significant tax concessions. When villas or rooms are rented out on a long-term basis, the first unit will be taxed at one percent, the second at two percent, and from the third unit onward at four percent as property transfer tax.
Businesses operating in such zones will face a lower tax rate, starting at 5% for the first 10 years, 10% for the next decade and 15% from the 21st year.
The government says the amendment is aimed at promoting sustainable development through mixed-use townships. Critics, including the opposition, say it could undermine the existing tourism tax framework and create unequal treatment in the industry.