Reflections from the Maldives Tax Forum 2025

Every so often, the economy evolves faster than the legal frameworks designed to govern it. We often find ourselves in this position and quickly rushing to catch up, especially whenever it comes to Goods and Services Tax (GST). Our GST regime still reflects a world in which consumption and production occur within the same borders, which is a world that no longer exists.

This article draws on reflections from the Destination-Based Taxation Panel at the Maldives Tax Forum 2025, moderated by Tholhath Rasheed, Senior Tax Advisor at Faris & Co LLP and SHC Law & Tax LLP. The panel featured Melina Rocha, Policy Advisor at the OECD’s Tax Administration and VAT Division; Shifa Thaufeeq, Director of Risk Management and Investigation at Maldives Inland Revenue Authority (MIRA); and Sulakshan Ramanan, Partner at Ernst & Young.

Here, I examine why the Maldives’ current GST framework struggles to tax cross-border digital services, offshore tourism transactions, and foreign suppliers who operate without ever entering our jurisdiction. Using the destination principle as a lens, I explore how a modernised GST system can correct long-standing imbalances, recover significant revenue leakages, and ensure that value consumed in the Maldives is taxed in the Maldives.

The Outdated System

The Maldives’ GST regime, as several panellists noted, contains elements of both the origin and destination approaches. It works reasonably well for domestic transactions. Yet its shortcomings become clear the moment a service is supplied remotely, a booking is made overseas, a platform market intervenes, or a foreign tour operator assembles a holiday package offshore.

In such cases, the current model produces outcomes that are neither neutral nor coherent. A foreign supplier, whether a digital platform, streaming provider, wholesaler, or franchisor, can operate entirely outside the Maldivian tax net while competing directly with businesses that must charge GST on the same or comparable services. The theoretical concern here is that the value of what is truly consumed in the Maldives escapes our tax net as the transaction has been structured offshore.

The Destination Principle

At its core, the destination principle insists on a simple proposition: taxes should follow consumption. It recognises that in a globalised, digital economy, the physical location of the supplier is far less relevant than where the product or service is actually enjoyed.

The panel’s keynote, delivered by an OECD expert, underscored this point with clarity. More than a hundred jurisdictions across developed and developing economies have already adopted destination-based rules for digital services and intangibles. The principle has matured into an international consensus:

• Exports are zero-rated;
• Imports are taxed as if they were supplied domestically; and
• Foreign suppliers register and comply through simplified mechanisms.

We as a nation rely heavily on the tourism sector sales. Therefore, the destination principle is not merely attractive, it is necessary. It realigns our tax system with economic substance and restores neutrality between local and offshore suppliers. More importantly, it ensures that the value created by our tourism sector, and consumed within our borders, yields the revenue it should.

Narrowing Down on Tourism

If the destination principle is a general solution, nowhere is its application more urgent than in the tourism industry. The numbers discussed during the panel reveal a structural imbalance:

• It was stated that over 70% of accommodation bookings are channelled through foreign tour operators or online platforms;
• Much of the pricing, bundling, and marketing occurs offshore; and
• GST is collected only on the wholesale rate paid to resorts, not on the retail price ultimately paid by the tourist.

This means that most of the value generated by Maldivian tourism is not part of the country’s GST base because the current legal framework fails to capture it.

Reforming Right

Reform, however, is not achieved by proclamation. It requires legislative clarity, administrative readiness, and stakeholder understanding. In this way, the panel identified several practical considerations:

• Lead time matters. International experience suggests at least 12 months before applying the rules to services and 12–18 months for low-value goods.
• Coordination between MIRA and Customs is essential, particularly if border collection is adopted for goods.
• Foreign suppliers must be engaged early so they understand registration and compliance requirements.
• Public-facing guidance we need to guide the public through simple dialogue.
• A phased approach allows institutions and businesses to adapt without disruption.

Conclusion

The Maldives now stands at an inflection point. When applied with methodological care and institutional discipline, the destination model yields increased revenue and overall coherence within the tax system. It is the next chapter in the evolution of our tax system.

Where international rules fall short of our domestic realities, we must improvise. As global tax currents change direction, we must adjust and adapt. And when we see revenue slipping quietly offshore, we must collectively overcome. I thank the panel for their contribution and encouragement.