MATTA worried departure levy will affect tourism

Kuala Lumpur: Instead of implementing a departure levy on all air passengers leaving the country, it would be logical for the Government to focus on creating healthier tourism fundamentals to stay competitive, said the Malaysian Association of Tour and Travel Agents (MATTA).

Its President Datuk Tan Kok Liang (pic) said the association was very concerned about the additional taxes on all passengers leaving Malaysian airports.

"Let us not forget that Malaysia's tourism industry is still trailing behind neighbouring countries such as Thailand, Singapore and Philippines," he said.

"In fact, visitor arrivals to Malaysia dropped by 3pc to 25.95 million in 2017 from 26.76 million in 2016. "Hence, the imposition of the departure levy will likely impact tourism with a knock-on effect on the wider economy."

To stay competitive in the tourism sector, Tan said, it would be best for the Government to focus on increasing flight connectivity, creating new tourism products as well as improving airport and tourist facilities.

"The Government needs to focus on creating healthier tourism fundamentals to stay competitive, including increasing flight connectivity and new tourism products, improving airport facilities and tourist welcome experience at the airport," he told Daily Express.

"It is not clear whether the departure levy is applicable to all Malaysians for outbound travel or all passengers including tourists. In any case, we are concerned about the adverse repercussions on tourist arrivals and outbound travel.

"The Government can look for extra revenue from other industry segments instead of taxing a highly sensitive tourism industry," Tan opined. He noted that departure levy is not implemented in many countries for obvious reasons.

"Such levy may deter tourists from choosing Malaysia as a preferred holiday destination, especially for price-sensitive travellers, if it is imposed on all air passengers leaving Malaysia.

"Air passengers are presently paying service charges. If the departure levy proposal is implemented, it will mean travellers will have to pay an additional tax.

"It would be a negative point for tourism on a wider scale, especially when measured against the potential 'earnings' and the potential 'loss' to the economy," he said.

Tan said the collection of the departure levy would only be a fraction of what the Government could gain from other forms of taxes such as SST and Tourism Tax.

"Furthermore, the levy will not have a significant impact on domestic tourism unless travellers have extreme budget constraints.

"Not all air passengers are 'tourists'. Malaysians fly internationally for other reasons such as pilgrimage (Umrah and Haj), education, business and seeking medical treatment," he said, adding, "we need to understand the possible effects, which may include airlines reducing capacity (seats or flights) from/to international points. That could result in higher fares and less foreign tourists."

He also claimed that the industry had not been consulted on the proposed implementation of the departure levy.

"This is disappointing."

Meanwhile, a think tank, the Institute for Democracy and Economic Affairs (Ideas), agreed with Tan that the implementation of the departure levy on all passengers leaving Malaysian airports may impact tourism with a knock-on effect on the wider economy.

It said the new levy of RM20 for those flying to Asean countries and RM40 for travel to all other international destinations would affect Malaysia's "competitive advantage".
"The levy would widen the competitiveness gap between Malaysia and Asean countries, given that the new rates are some 7pc to 9pc more than those of Thailand, Singapore and Indonesia collectively.

"This will pressure the Malaysian aviation market and possibly limit the growth of tourism, as other nearby countries are relatively cheaper to visit," Ideas said.

"When the new departure levy is implemented, on our calculations, ticket prices from Malaysia are expected to go up by RM20 and the 'total tax' becomes RM56.

"With this departure levy in place, the price difference will significantly increase to a 7pc to 9pc difference of tax on flight tickets to nearby destinations compared to other Asean countries.

"When visiting non-Asean destinations, the part of the tax paid for a full-service flight ticket after the implementation of the departure levy will increase by approximately 3pc," Ideas economists Adli Amirullah and Irene van Eldik said.

During the tabling of Budget 2019, Putrajaya had proposed a departure levy on all air travellers leaving the country from June 1, 2019, to encourage the development of domestic tourism. - Nikko Fabian