Tourism the loser as tax grab targets travellers

Australia has entered the competition to see which country can impose the biggest travel tax – and we're already winning in at least some categories.

The global champion is Britain, which has made itself the most unfriendly country in the world for travellers with its infamous Air Passenger Duty (APD), which now costs £92 ($147) per head for travellers to and from long-haul destinations such as Australia.

But, not to be beaten, Australia’s money-hungry government has just increased its departure tax from $48 to $55 for every international traveller regardless of origin or destination, far outstripping Britain’s measly £13 ($21) for trips of up to 2000 miles (3200 kilometres).

In fact, the travel tax for a trip to from Australia to London is now equivalent to a quarter of the $800 return air fare that low-cost carrier AirAsia X was quoting up until a year ago. A family of four travelling between Australia and the UK will pay $808 in tax alone.

No wonder AAX pulled out of London (and Paris) earlier this year, citing Europe’s high taxation regime as unsustainable for a low-cost airline. The EU is also now charging airlines an emissions tax under its Emissions Trading Scheme, which is threatening to start a trade war with the rest of the world, led by China and the US.

Cash-strapped Germany joined in the price-gouging of travellers last year with an "eco-tax" on travel, separate from the ETS, of up to €45 ($58) for long-haul travellers, and Austria has followed suit with a tax of up to €35 ($45).

Less than a year ago, Australian tourism was in crisis as the rising dollar, then bad weather in Queensland, and even the eruption of a volcano in Chile, which grounded Australian flights, threatened to derail attempts to halt the stagnation in the number of foreign tourists visiting the country.

Predictably, the decision to increase the so-called passenger movement charge (PMC) has attracted criticism from airlines, airports and the tourism industry because it will make inbound tourism  less attractive when the number of arrivals is already struggling.

Just to rub it in, the Australian government has announced the charge will be linked to inflation and will rise each year with the Consumer Price Index (CPI) for the first time.


The travel business wouldn’t mind so much if the money – up to $1 billion a year by 2015-16 – was being used to help the industry. But it’s a simple cash grab and will go straight into consolidated revenue.

"Even before the increase, the PMC was totally unjustified and there was no transparency as to the use of these funds that was extracted from aviation," said a spokesman for the airline organisation, International Air Transport Association, Albert Tjoeng.

"We support the need to boost tourism. But taxing air travel to boost tourism is self-defeating. There will be a negative impact on GDP, jobs and consumers."

The industry’s mouthpiece, the Tourism and Transport Forum calculates the tax raised $620m in 2010-11 but the government spent just $330m on passenger processing by Customs, quarantine and immigration.

"The message from the Gillard government is clear – when you enter an airport, everywhere you turn, you will be taxed," TTF chief executive John Lee said.

Qantas warned that the tax hike would have a direct impact on the cost of flying to and from Australia and particularly on price-sensitive passengers on low-fare carriers such as Jetstar.

"Australia is already a relatively high-cost destination for tourists due to the strong dollar and this tax will affect demand," Qantas spokeswoman Olivia Wirth said.

"It will also have a disproportionate impact on the cost of shorter flights to places like New Zealand and Southeast Asia."

Does the tax issue concern you or will you be travelling overseas regardless? Do you have friends or family overseas who are baulking at the taxes required to visit Australia? Will it affect your short-haul travel, as the industry fears, to places like New Zealand?