Fair and Unfair Taxes on Tourists
As international tourist numbers have increased in recent years governments around the world have taken advantage of tourism as a source of tax revenue. In principal, there is nothing inherently wrong with governments imposing taxes on tourists which may contribute to the cost of building infrastructure and enhancing security which will benefit tourism to each country. Departure taxes and security taxes levied by governments have helped to fund improved airports and the cost of enhanced security measures which protect tourists and enhance their safety and the quality experience in the country and benefit locals and tourists alike.
There is a case which can be made for environmental levies in which tourists contribute to the costs of the damage inflicted on the environment by using airlines which create emissions. However, some governments have imposed levels of taxes on tourists which go well beyond the recouping of costs.
In 2013 The UN World Tourism Organisation, The World Travel and Tourism Council and the Pacific Asia Travel Association joined forces to confront the British government over what they saw as the excessive levels of tax applied via the Air Passenger Duty to travellers who were travelling on medium and long haul flights. In fact the levels of duty imposed by the British government for long haul flights made up a significant portion of the total air fare. The British government at the time claimed that the duty was designed to recoup the costs of environmental damage caused by aircraft. However, the general consensus among tourism professionals was that the tax was simply a revenue raising exercise which penalised long haul travellers flying out of Britain.
The Australian Government has flagged that it plans to introduce a special tax rate for working holiday travellers from 01 July 2016. If this proposal is implemented it will mean that people working in Australia on a working holiday visa will be expected to pay a tax rate of 32.5 cents in the dollar for every dollar they earn up to $18,000. Australian citizens and residents pay zero tax on their first $18,000 of income. The tax impost on $18,000 for working holiday visa holders works out at $5,850 per person. Clearly this is a highly discriminatory tax rate and major Australian tourism industry associations including the Tourism and Transport Forum and the Australian Tourism Export Council have roundly condemned the “backpacker tax” hike.
The agricultural industry which is highly dependent on international backpackers for seasonal jobs such as fruit picking have also roundly condemned the tax proposal. Discriminatory, excessive and opportunistic tax imposts are poison for tourism. Governments need to realise tourists make destination choices which factor in value for money. Working holiday tourists should pay the same rate of taxes in Australia as any Australian citizen or resident. This is not only fair but also acts as an incentive for international visitors to choose Australia as a working holiday destination and contribute to the Australian economy through their spending on visitation in the country which flows from their long term of stay. It is to be hoped that Australian Treasurer, Scott Morrison (a former CEO of Tourism Australia) will realise that imposing a highly discriminatory tax impost on working holiday travellers could kill the travel goose that lays the golden egg of tourism income.
In the week ahead as the Australian budget for 2016-17 is released it is hoped that wise heads within the Australian government will prevail and this obscene tax proposal is consigned to the dustbin of failed and short-sighted policy ideas.