Backpacker changes give with one hand but take with the other

30 September, 2016

While some changes to the working holiday maker program announced by the Government today are welcome the overall impact of the measures will be a damaging brake on tourism, Australia’s fastest growing export sector, the Australian Chamber of Commerce and Industry said recently.

James Pearson, CEO of the Australian Chamber, said: "The compromise announced by the Government today is a mixed result for the sector.

"We welcome the reduced 'backpacker tax', the commitment to spending $10 million on tourism promotion, changes to the length of time visitors can work and the expansion of the age range for eligible visitors. These broadly reflect the Australian Chamber's submission to the Government review of the working holiday maker scheme.

"However we are deeply concerned about the $5 increase in the Passenger Movement Charge (PMC), which will slug every person flying out of Australia, including international visitors returning home and locals travelling abroad.

"The 'backpacker tax' was bad policy. While the Government's revenue projections were unrealistic, it would have badly hurt the visitor economy. Therefore reducing the proposed tax rate to 19 per cent from 32.5 per cent is an improvement.

"In our submission we argued there should be no attempt to recoup revenue by increasing any other tax on tourism. It is disappointing the Government has ignored that recommendation. The PMC increase is a revenue grab that amounts to a 9 per cent increase to what are already the highest short-haul ticket tax and second-highest long-haul ticket tax in the world.

"The PMC will already raise $1 billion this year, with the amount growing strongly even without the latest rate increase. The extra $90 million likely to be collected each year will make Australia a less competitive destination.

"By the Government's own figures for average earnings for working holiday makers, if the number of visitors stays steady this year the Government will raise its target revenue from a 19 per cent tax alone. The additional PMC charge therefore appears unjustified.

"The Government is slugging tourism exports in a way it would not do for agricultural or mineral exports. Tourism is one of Australia's export heroes, delivering jobs, export income and government revenue. The Government is undermining this progress on the questionable assumption that demand will not be affected by price."