In a sop to the tourism industry, the federal government has dropped a plan to index the passenger movement charge (airport tax) annually in line with rises in the consumer price index to avoid certain defeat in the lower house and the senate.
Home affairs minister Jason Clare said the government had decided to drop the indexation following recommendations from a parliamentary committee.
But the unpopular tax increase will go ahead costing passengers departing the country after July 1 $55, an $8 increase after the lower house unanimously passed the bill.
The Gillard government has promised 10% would be spent on the growing Asian market. Now, as a further pacifier to the industry, another 10% – close to $50 million – will go into the Regional Development Australia Fund to support regional tourism and related businesses.
Opposition treasurer Joe Hockey attacked the government’s triple backflip after it amended an earlier bill debated last week to not double the managed investment trust withholding tax and hinted at implementing corporate tax cuts after all.
Member for Barron River, Michael Trout, welcomed both the managed investment trust and CPI indexing of the airport tax backflips. He congratulated the Australian shadow tourism minister, Bob Baldwin, on his role in preventing these initiatives from going ahead. “If these two planned changes had gone ahead, they would have had serious repercussions on our tourist industry in this region.”
Mr Trout said that it was energetic lobbying by tourism bodies that prevented the federal government from proceeding with these plans.
The budget decision to raise the airport tax by 17% infuriated the tourism industry. Strong advocacy by ATEC, in partnership with other major tourism industry bodies, initiated a strong campaign to fight the increase, including a significant media campaign. While it failed in stopping the increase it has gained a concession in not having an automatic annual inflation.
ATEC’s managing director Felicia Mariani said, “The industry isn’t excited about the prospect of an increase to the PMC, which comes on top of the carbon tax, the high Australian dollar and all the other external pressures faced by tourism businesses right now,” Ms Mariani said. “We are pleased to have averted the proposal to embed an annual increase tied to CPI and that the government realised this ongoing tax hit would be extraordinarily damaging to our industry.
“This decision was a direct result of a coordinated and sustained campaign against this indexation that finally went beyond the halls of Canberra. Industry’s objection to this latest grab for cash was vocal, public and solid in its commitment by all industry associations.”
“The Tourism Industry Regional Development Fund represents a significant opportunity for Australia’s accommodation industry,” said the chief executive officer of the Accommodation Association of Australia, Richard Munro.
“The fact that successful applicants will have access to money from the fund for extensions and refurbishments of tourism accommodation is a solid step forward for our industry, particularly for smaller motels in regional parts of Australia. This is complemented by the MIT withholding tax remaining at its current level.
“These are two compelling reasons for there to be higher levels of investment in Australia’s tourism accommodation product.”
Mr Munro said that while the accommodation industry remains opposed to any increases in the PMC, a fixed charge is preferable.
“The PMC has and always will be a ‘tax on tourism’ but the industry is encouraged by the strong possibility that it will not rise every year, as a result of the decision not to proceed with annual indexation of the PMC,” he said.