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Wednesday, 24 August 1994
Page: 306

(Question No. 1548)

Senator Ian Macdonald asked the Minister for Small Business, Customs and Construction, upon notice, on 5 July 1994:

  With reference to the fact that at an Estimates Committee D hearing (Senate Hansard, 26 May 1994, page D49) the department advised that the impact of the increase in departure tax or passenger processing charge of $2 on the tourism industry had been researched and that the Minister for Tourism (Mr Lee) advised by press release, date 10 May 1994, that the charge would be collected through the airlines:

  (1) What research has been undertaken into the extra cost for airlines in collecting the charge and please detail the results of this research.

  (2) At a recent Tax on Tourism Seminar in Cairns, industry sources advised that the extra cost to airlines would be around an extra $7 per person, is this a reasonable estimate of the costs imposed.

  (3) Has there been any research on the implementation of the passenger processing charge on visitors arriving in Australia; if so, please detail the results of the research.

Senator Schacht —The answer to the honourable senator's question is as follows:

  (1) Part of the Government's reason for seeking to have the airlines collect the charge is that international comparisons have shown that the administrative costs of collection of the existing departure tax are high by world standards, at 4—5% of revenue collected, compared with about 2% in other countries with similar charges. The Government expects that it should be possible for collection costs for the new Passenger Movement Charge (PMC) to be of the same order. In deciding to implement the PMC, the Government also decided that it would meet the airlines' establishment and running costs of the necessary systems. The airlines are presently determining what those costs might be. On the assumption that the ongoing costs are comparable with international experience, there will be no costs to airlines for collecting the PMC. I might point out that the British government is imposing an Air Passenger Duty from 1 November 1994, to be collected by law by airlines, but will not be meeting collection costs. This Government's decision to meet reasonable collection costs reflects our recognition of the importance of the travel and tourism industry to Australia, and the Government's desire to work with industry.

  (2) See (1).

  (3) As reported by a Departmental official at Estimates Committee D on 26 May 1994 (page D49), the National Passenger Processing Committee (NPPC) Working Party on Cost Recovery Options for Passenger Processing considered the effect of cost recovery on passenger numbers. Drawing upon previous studies of demand elasticities for international travel, the NPPC Working Party calculated the possible hypothetical reduction in passenger numbers. Using the same methodology, an increase of $2 in the level of charges might lead to a reduction of between 2000—5000 travellers. However, the Working Party did not take into account the positive impact that increases in charges might have in inducing Australians to take domestic, rather than international, holidays and it therefore qualified its calculation by saying that `. . . the net impact on the tourist industry from a CIQ charge is unknown, but it will certainly be less than the figures above suggest, considering only foreign tourists. We cannot even be sure the overall impact will be negative.' The other factor that the Working Party did not take into account is the effect that collection of the PMC by airlines will have on streamlining passenger movement at airports, contributing to a positive image of Australia as a destination because of the ease of movement into and out of the country. Overall, it is clear that the effect of the $2 increase will be negligible.