The Malaysian Insight

A DEPARTURE levy comes at a wrong time for Malaysia as tourists already pay for airport, hotel and service taxes, said industry players.

The levy may be counterproductive to Putrajaya’s plan to promote 2020 as Malaysian Tourism Year, especially when other Asean countries make it cheaper for tourists, they said.

The timing of the levy is also wrong as the global economy is slowing and this will affect the tourism industry.

Foreign tourists are already taxed too much in Malaysia and this will add to the cost of tour packages, said Malaysia Inbound Tourism Association deputy president Mint Leong.

“You need to pay RM10 every night for hotels, so if you’re visiting Malaysia for five days you’ll need to pay RM50. 

“When tourists make bookings on the internet, buy food in Malaysia or rent cars, they need to pay 6% sales and services tax. Add the departure levy as well and this is a lot to be asking out of tourists,” Leong told The Malaysian Insight.

For locals exiting the country, however, imposing a levy of RM20 to RM40 is not unreasonable, she said.

“This can even increase government revenue and promote local tourism, but it will not encourage foreign tourists to visit Malaysia.”

Businesses will suffer if tourists decide to skip Malaysia because of the levy, she said.

“It’s not that tourists cannot afford it, but what makes Malaysia a destination that tourists must visit?” she said.

“European countries, the US and Australia are all expensive countries to visit, but tourists go nonetheless. Does Malaysia have the same draw? Is it a must-visit?

“Malaysia has many competitors in the region as well, like Thailand, Indonesia, the Philippines. With Tourism Malaysia Year 2020 so close, I don’t understand why the departure levy has to be included as well.”

She said the levy will not only affect the tourism industry but also business executives who travel abroad to attend conferences or to expand their business networks.

The bill on the departure levy for air travellers has been passed in Dewan Rakyat and it now awaiting Dewan Negara approval. The Finance Ministry is expected to implement the levy after the haj season.

Malaysian Chinese Tourism Association president Albert Tan said it is not the right time to implement the departure levy as the tourism industry is in the midst of a slowdown after the Chinese New Year.

The levy will increase the cost of travel to Malaysia and may affect arrivals from China, Taiwan and Hong Kong during their holidays in August, he said.

“What Malaysia should be doing now is to encourage more people to visit the country so that they will spend more money here. 

“That is why I don’t think it’s a good idea to implement the departure levy.”

Numbers from the Tourism Ministry show that arrivals have not fallen but more and more tourists are choosing independent travels instead of tours, which usually mean they are more budget conscious, he said.

The levy is expected to further discourage tourists who are travelling on a budget.

“This may affect Malaysia’s global competitiveness. The spending power of Malaysians are falling and the supermarkets are not as crowded as before. We are hoping to boost the economy by attracting more tourists who will spend their money here,” he said.

“Now we are competing with Thailand, Vietnam, Indonesia and the Philippines, who are all going into overdrive to assist the tourism industry, but Malaysia is heading the other direction and there has been no initiative to attract more tourists.”

Asked if the industry will promote more Singapore-Malaysia tour packages to overcome the departure levy, Tan said he believes so.

“I think so, industry players can adapt. Right now, the Singapore-Malaysia tours run for five days and start in Singapore before moving into Malaysia. Industry players may organise tours that last three days in Malaysia, heading to Malacca and Johor before entering Singapore,” he said.

Leong agreed, too, saying that industry players may take advantage of Singapore’s air ticket promotional season to enter Malaysia through the republic as the departure levy only applies to air travel.

Industry players are also hoping for a quick announcement on the levy’s collection method.

Tan said the Finance Ministry had not revealed much about how the levy will be collected but hoped that the government won’t make tourism players their taxmen as it will burden them further.

It was estimated by the International Air Transport Association that the departure levy will reduce annual departures from Malaysia by 835,000.

This translates into a reduction of RM419 million in GDP and may possible cost 5,300 jobs.

In 2017, the aviation industry employed 450,000 people and is estimated to have contributed RM40.4 billion to the economy.

The departure levy will only be imposed on those flying out of the country. The government has not announced the rate of the levy but in Budget 2019, it proposed a departure levy of RM20 to Asean countries and RM40 for non-Asean countries.

The departure levy is on top of the passenger service charges (PSC) imposed on passengers flying out of the country through airports, which are RM11 per traveller on a domestic route, RM35 for Asean countries and RM73 to other countries. – April 16, 2019.