Chapter 3
Key issues
3.1
The proposed increase to the passenger movement charge (PMC) drew
comment from airports, the airline industry and tourism bodies.[1]
The Commonwealth Department of Resources, Energy and Tourism (Department) also
made a submission.
3.2
All submitters to the inquiry, save for the Department, were opposed to
the proposed increase in the PMC and its indexation to the Consumer Price Index
(CPI).
3.3
Submitters were concerned that the increase in the charge would
negatively impact on the number of international visitors to Australia, thus
affecting the tourism and aviation industries.
Purpose of the passenger movement charge
3.4
Many submitters were concerned that the PMC is no longer being applied
as it was originally intended – namely, as a measure to recover the costs of
customs, immigration and quarantine processing of passengers entering and
leaving Australia.[2]
Instead, the PMC is seen by the aviation and tourism industries as a general
tax to generate government revenue.
3.5
For example, the National Tourism Alliance (NTA) submitted:
Prior to this proposed increase, there was significant
industry disquiet about this tax, given that it collects revenue over and above
the cost of passenger processing at international airports. The PMC contains
both a justified cost recovery component and an unjustified general taxation
component. The cost recovery component covers the various costs identified
earlier, including passenger processing. However, collection from the PMC
exceeds these costs, and it is the amount of over-collection that represents an
unjustified tax.[3]
3.6
In evidence to the committee, Customs and Border Protection refuted
claims that the PMC is still designed to be a cost recovery measure. Mr Jeff
Buckpitt, National Director of the Passengers Division stated:
I think the fundamental point that we [Customs and Border
Protection] would submit is that the passenger movement charge is not cost
recovery; it is a tax. It has been classified as a tax since [the Mid-Year
Economic and Fiscal Outlook] in 2005–06, and suggestions that the two should
equate are, I think, misguided.[4]
Using the PMC to increase funding for passenger processing
3.7
It was argued by the airport industry that the costs derived from an
increased PMC should be used to fund customs, immigration and quarantine
functions at Australia's airports.[5]
According to the industry, there has been a decline in funding for the
processing of international passengers at airports which is in contrast to the
increase in revenue generated by the PMC.
3.8
The Brisbane Airport Corporation submitted:
...as is clear in forward estimates, there is a significant
difference between the $860 million budgeted for passenger facilitation at
Australia's ports over that period, and the $3.6 billion in revenue generated
through the PMC.[6]
3.9
The Australian Airports Association (AAA) was similarly concerned that 'the
PMC already generates approximately three times the amount spent on staffing
for Customs and Federal Police, with the surplus accruing in consolidated
revenue'. [7]
3.10
A representative from the AAA noted in evidence:
...any passenger paying this money [the PMC] should also
expect a basic standard of facilitation when they come to our country—after
all, that is what they are paying for. We would argue that for $55 they are not
getting the value and as such the increase should not occur. If it does occur
then that money should be invested back into Customs and quarantine and the
facilities that are actually meant to be used for the processing of passengers.[8]
3.11
Melbourne Airport noted that, while some of the revenue from the
increased PMC is intended to be used to boost Australian tourism numbers, none of
that revenue has been earmarked for spending on increased passenger
facilitation at international airports.[9]
The airport went on to explain:
While we clearly welcome initiatives to grow demand for
travel to Australia by international visitors, it is somewhat unusual to be
generating increased demand without making any provision to adequately service
that demand. Indeed, our border agencies are already under significant pressure
to manage existing demand with fewer resources. The roll-out of additional
SmartGate facilities to process Australian and New Zealand passport holders is
being delivered from within the existing Budget at the expense of Customs
staffing numbers.[10]
3.12
The airport industry was also concerned that, on top of an increased PMC,
the Australian Government intends to introduce partial cost recovery for
community policing activities by the Australian Federal Police at international
airports from July 2013.[11]
3.13
In light of the discrepancy between revenue raised by the PMC and the
amount spend on passenger facilitation, the airport industry requested:
...the revenue generated from the PMC be directed to funding
much needed Customs staff and technology at the primary line as opposed to
consolidated revenue.[12]
3.14
The airport and aviation industries also warned that the proposed
increase to the PMC comes at a time of rising and increasingly volatile fuel
prices which may also have an impact on costs to consumers.[13]
Impact on the Australian tourism industry
3.15
Both the tourism and aviation industries were concerned that an increase
in the PMC would have a negative impact on international visitor numbers and on
the Australian tourism industry due to the increased cost of fares from
Australia.[14]
3.16
It was noted by a number of submitters, including the Department, that
the PMC is considered high by global standards.[15]
3.17
According to the National Tourism Alliance (NTA), tourism contributes
over $34 billion (2.6 per cent) to Australia's gross domestic product and
employs over 500 000 people. Tourism is also Australia's largest services
export industry, contributing $23 billion (9.0 per cent) to Australia's total
export earnings for goods and services.[16]
3.18
The NTA further noted that the past decade has proved challenging for
the tourism industry. Australia's share of global international arrivals has
declined by 17.3 per cent since 2000 and the country has fallen from 9th
position in 2009 to 13th position in 2011 in the World Economic Forum
Tourism and Travel Competitiveness Index.[17]
3.19
The NTA explained:
A range of factors, particularly tourism's exposure to
external shocks, have driven this decline. Further, recent global economic
conditions have not been favourable for the Australian tourism sector. The
global economic crisis has resulted in significant declines in visitor numbers
from traditional markets (such as the United Kingdom, the United States and
Japan) that have faced difficult economic circumstances, whilst the strong
Australian dollar has provided strong incentives for Australian travellers to
look abroad for travel options.[18]
3.20
The Tourism and Transport Forum (TTF) also noted that the strength of
the Australian dollar is enticing more Australians to travel internationally,
meaning they are less likely to travel domestically. According to the TTF:
The growth in overseas travel by Australians means that
Australia is suffering from a significant deficit in our tourism balance of
trade. This is the difference between what international visitors spend in
Australia and the amount Australians spend overseas.[19]
3.21
Although the Australian tourism industry has been through a difficult
period, statistics from the National Visitor Survey – Travel by Australians:
March Quarter 2012 indicate that domestic travel figures are beginning to
reach levels that occurred prior to the Global Financial Crisis in 2008.[20]
3.22
Similarly, the International Visitor Survey – International Visitors
in Australia: March Quarter 2012 found that Chinese visitors to Australia
in the year ending March 2012 were up by 15 per cent.[21]
3.23
Analysis undertaken by the International Air Transport Association
(IATA) estimates that the increased PMC could result in the following impacts to
the tourism industry during the next calendar year:
Reduction of $225 million in GDP; a loss of 2600 jobs; and
reduced tax receipts of $53 million.[22]
3.24
The Brisbane Airport Corporation's view of the impact was representative
of the airport and aviation industries:
Our tourism and aviation industries are exposed to intense
competition and volatility in the international market. It is absolutely
essential that we do not put further obstacles in the way of attracting
international visitors and supporting the growth of international aviation by
arbitrary increases to charges such as the PMC.[23]
3.25
The Accommodation Association of Australia (AAA) considered that an
increase in the PMC would lead to reduced visitor numbers, lower occupancy and
average room rates in tourism accommodation businesses:
Given it is already widely acknowledged that Australia is a
high-cost tourism destination, adding to these costs through a higher PMC
creates an additional reason why overseas consumers will choose not to travel
to Australia.[24]
3.26
The tourism and airport industries also raised concerns that an increase
in the PMC would significantly impact on regional domestic tourism markets.[25]
3.27
The Tourism and Transport Forum informed the committee that the
percentage of money that international visitors spend in regional tourism
destinations has dropped from 23 per cent in 2006 to 18 per cent in 2012. This
contrasts with overall visitor spending which has risen 37 per cent. The number
of international visitors to regional tourism destinations has also fallen from
38 per cent to 34 per cent in that time.[26]
3.28
Tourism Northern Territory likewise expressed concerns that an increased
PMC could have a significant impact on regional tourism destinations that are
increasingly struggling to attract international visitors:
Whilst the proposed amendments to the PMC will apply to all
Australian international gateways, its impact will be felt across Darwin more
acutely than other regions by the nature of the PMC being an equalised charge,
independent of the destination. Nearly all international departures from Darwin
are bound to short-haul South East Asian destinations; the PMC already
constitutes a greater per cent of the airfare from Darwin (between 13 per cent
and 17 per cent of the airfare from Darwin).[27]
3.29
Submitters also raised concerns that the increase in the PMC could have
a disproportionate impact on short-haul international travel, especially travel
focussed on price-sensitive leisure destinations such as Asia and New Zealand.[28]
3.30
The National Tourism Alliance was concerned that the increased PMC would
be 'counterproductive to proactive efforts to stimulate increased visitation,
such as streamlining border processing arrangements between Australia and New
Zealand'.[29]
3.31
In response to the concerns raised by the aviation and tourism
industries, the Department informed the committee of research undertaken by the
Centre of Economics and Policy within the University of New South Wales. The
research indicates that there would be 'minimal impact on the tourism industry
from a rise in the PMC from its current level'.[30]
3.32
The study found that, overall, a 20 per cent increase in the PMC is
positive for the Australian economy by $49 million in terms of gross national income.[31]
The study also found that the tourism industry would be worse off by $7.5
million or 0.089 per cent per annum. The study states:
These results show that raising a tax will provide a net
benefit to the Australian economy, which run contrary to conventional wisdom.[32]
3.33
In analysing the study, the Department noted that the loss in tourism
exports due to an increased PMC would be:
...partially offset by an increase of $13.2 million a year in
domestic travel expenditure as Australian residents switch from outbound to
domestic travel.[33]
3.34
The Department also noted:
...the average international visitor to Australia last
financial year spent $4,096 and the proposed increase of $8 represents only a
small cost of the total trip spend (0.2 per cent).[34]
3.35
In summary, the Department was of the view that an increased PMC on the
Australian tourism industry would be:
...only a marginal impact. The increase in the overall cost
of visiting Australia, represented as a proportion of expenditure, is very
small. Combined with the offsetting of 10 per cent of that passenger movement
charge revenue for a major initiative into Asia by Tourism Australia, we
believe this decision will have a net positive increase in tourism.[35]
Funding to Tourism Australia
3.36
In the Minister's second reading speech, it was announced that the
proposed increase in the PMC would 'fund the establishment of the Asia
Marketing Fund to support the promotion of Australia to growing markets in Asia
as a premium holiday and business destination'.[36]
$61 million dollars from an increased PMC would be allocated to the fund.
3.37
A number of submitters were supportive of the proposal to better market
Australia as a holiday and business destination to Asian markets. However,
submitters argued that the PMC should not be increased to support the fund.[37]
3.38
The committee was informed that, in addition to the Asia Marketing Fund,
the Australian Government has provided Tourism Australia with funding of $530
million over the next four years to market Australia as a tourist destination.[38]
3.39
Included in this funding is $180 million over the next three years to
fund the There is nothing like Australia campaign. The campaign is
expected to be further funded by up to $70 million from industry partners to
support joint marketing activities.[39]
The campaign will market Australia as a tourist destination to the domestic tourism
market and key international markets such as China, the United Kingdom and
the United States.[40]
Committee view
3.40
There are many costs to government arising directly from the flow of
passengers and goods to and from Australia. In light of the costs to government
of providing customs, immigration and quarantine services, it is not
inappropriate for those who use these services to make a contribution to their
provision via a mechanism such as the PMC. It is, therefore, the committee's
view that the PMC is an appropriately targeted tax.
3.41
While some submitters claimed that increases to the PMC had not resulted
in additional funding for customs, immigration and quarantine services, the committee
notes that the government has provided over $200 million in funding since
2010 to fund the Strengthening Aviation Security Initiative to boost the
aviation industry and improve security at Australia's airports.[41]
3.42
The committee recognises the difficulties currently facing the
Australian tourism and aviation industries due to a high Australian dollar and
uncertainty in some international markets. While noting the concerns of these industries
regarding the potential negative impact of an increased PMC, the committee
draws attention to research by the University of New South Wales which
indicates that a 20 per cent increase in the PMC would have only a marginal
impact on international tourism to Australia.
3.43
With respect to tourism in Australia, the committee welcomes the
government's announcement that revenue generated by an increase in the PMC will
go toward establishing the Asia Marketing Fund to promote Australia to growing tourism
markets in Asia. Further, the government will provide funding of $180 million
to Tourism Australia over the next three years to launch an international
campaign promoting Australia as a tourist destination which will be of further
benefit to the tourism and aviation industries.
Recommendation 1
3.44
The committee recommends that the Bill be passed.
Senator Trish Crossin
Chair
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