ANY tax on tourism inevitably impacts the industry, but in the pre-pandemic boom times that didn’t seem to matter to successive Australian governments. Travellers to and from Australia have long been seen as an easy mark, particularly with high long-haul airfares which meant the impost of the Passenger Movement Charge (PMC) was relatively insignificant compared to the total ticket price.
And despite the travails of the last few years, it seems that some of our current Federal masters are once again turning their thoughts to the juicy opportunities provided by clipping those tickets in terms of helping the wider Budget bottom line. AFTA CEO Dean Long has this week confirmed the Federation’s watching brief on such matters has seen suggestions in some quarters of officaldom that perhaps it may be time to increase the PMC, particularly in terms of a wider worsening global economic outlook.
Such thoughts should be the last thing the Government has in mind, however tempting it may be to undertake some “budget repair” through this easy target. The PMC, which collected more than $1.2 billion for the Federal coffers in 2019, was originally created as a means of cost recovery for Australia’s border security, customs and visa processing initiatives, but any pretence of linking it to such outcomes has long been dropped, with the excessively over-collected money raised instead designated to that mysterious “consolidated revenue” bucket.
Every traveller is currently charged $60 for the privilege of passing through Australia’s international borders, a figure which has remained unchanged since 2017 after gradually creeping up from $27 when it was initiated in 1995. This week Long confirmed that in the lead-up to the Budget, which is now less than a month away, AFTA has made representations on the PMC to various Ministers including Tourism and Trade Minister Don Farrell, Treasurer Jim Chalmers and Agriculture Minister Murray Watt.
“Increasing the PMC in our period of recovery would be extremely damaging, not simply to overall demand but also to Australia’s competitiveness as a destination,” Long noted.
Looking back through the pages of Travel Daily over the years, possible increases to the PMC have been a regular feature of pre-budget discussions. Indeed as far back as 2010 the then Rudd Labor Government leaked plans for an upward move, which were quickly scotched after outrage from across the visitor economy. Two years later under Prime Minister Julia Gillard, Treasurer Wayne Swan imposed an $8 increase from $47 to $55, and at the time also announced that the PMC would be indexed to inflation. Swan added insult to injury by attempting to sweeten the pot as he announced that of the more than $600 million in additional tax collected over four years, a meagre 10% or $61 milllion would be directed to a dedicated Tourism Australia “Asian Marketing Fund”.
The furore around that 2012 increase saw AFTA CEO Jayson Westbury join an ultimately unsuccessful broad coalition including ATEC and the TTF urging MPs to vote against the measure, which had been announced but not yet legislated. Later that year the Productivity Commission handed down a report on trans-Tasman economic relations which slammed the measure, and then in September 2013 Prime Ministerial aspirant Tony Abbott thrilled the industry with a pre-election promise to scrap the indexation of the PMC – a move which was implemented once the Coalition entered power later that month.
However that was definitely not the end of the matter, with a draft review of Customs fees in 2014 by then Immigration Minister, Scott Morrison, proposing a sliding scale for the detested tax based on destination and cabin class booked. Morrison’s plan hinted that the Passenger Movement Charge, which at the time was $55, could increase to as much as $270 for a First Class long-haul passenger. Outrage naturally ensued, and Tourism and Trade Minister Andrew Robb quickly doused the speculation. And then after several calls over the next couple of years to dump the so-called “holiday tax”, the Coalition Government instead bowed to the inevitable and lifted the PMC to $60 – a level where it has remained since 2017. At the time Westbury described the move as “a joke” and noted the PMC would raise an additional $293 million for the Government.
Amid the furore of the 2016 increase (which became effective in July the following year), a sop to the industry was an undertaking in a Senate amendment not to make further changes to the PMC for another five years. Guess what – that time is up.
After that history lesson, it’s no wonder that the jungle drums are rumbling about another increase. As we all learnt to our detriment during the pandemic, the voices clamouring for Government attention are many and varied, and until 2020 we were all quite happy to do our own thing. Thankfully we have organisations like AFTA, ATEC and TTF keeping an eye on issues like this, which if left up to the Government’s own devices have the potential to quickly stifle our recovering industry.
It should also be noted that several IATA reports analysing the costs and benefits of the PMC have concluded that the impost does significant damage to the Australian economy. In 2013 the Association estimated that abolishing the charge completely would lift international passenger traffic to Australia by 2.5%, and boost the economy by about $1.7 billion. That would provide a net benefit to the Australian Government’s bottom line, even accounting for the revenue lost by axing the tax. It seems like common sense, but as evidenced by the PMC saga over the years, that’s not something that Australian Governments are well known for.