TTF View – August 2012
Will the rush to implement duty free tobacco cuts
see tourism go up in smoke?
By John Lee, chief executive, Tourism & Transport Forum
THE 2012/13 Federal Budget con-tained a few surprises for the tourism industry. The first was an unexpected increase in the passenger movement charge with automatic CPI-linked increases (which were headed off by a campaign led by TTF and AFTA)
The second, to be implemented from September, lowers the amount of duty free tobacco passengers can bring into Australia from 250 grams (250 cigarettes) to 50 grams (50 cigarettes).
Travellers exceeding this limit have two choices – either pay duty on all tobacco in their possession – about $95 per carton – or forfeit it.
Customs estimates that in the initial three months after implementation, 18 per cent of inbound passengers will have tobacco above the new threshold.
At current arrival rates, that’s almost a quarter of a million passengers every month at a time when
Customs’ budget has been cut back, leading to reductions in staff processing passengers.
This creates a scenario which will see fewer personnel trying to deal with increasing inbound passenger numbers – especially from non-English speaking countries – many of whom will arrive in Australia completely unaware of the new restrictions. The result will be delays for all arrivals – a far from ideal welcome to Australia.
There is a divergence of views on the revenue this measure will deliver, with the Federal Government estimating it will generate over $300 million in tobacco duty while a Deloitte study says it will be almost revenue neutral.
An effective communications strategy in key overseas markets is essential when making this type of change, but Customs has not been given sufficient time or budget to mount such a campaign.
Of particular concern is the damage it will do to our image in China, an increasingly important market for the Australian tourism industry.
Almost 600,000 Chinese citizens visited Australia last year and they are already our number one international source market based on expenditure, however China has not yet been included in the communications strategy.
We are concerned at the reputational damage this will do to Australia. We are concerned people arriving in Australia, most after a long-haul flight, will become very agitated when they find out they will have to pay almost $100 to keep their cigarettes or give them up altogether.
While this directly affects a minority of passengers, a negative reaction to the new limit threatens to leave a sour taste in the mouths of all other passengers arriving at the same time.
First impressions matter more to tourism than to any other industry. Delays and the anticipated scenes of civil disturbance associated with this measure will inevitably lead to fewer repeat visitors or favourable referrals.
In rushing through the changes, the government has not taken into account the unintended consequences for duty free retailers, airports and the broader tourism industry. And we fear the cost will far exceed any additional government revenue this initiative will generate.
TTF View appears quarterly.