If you can afford to fly you can afford to pay. This seems to be the rationale behind the Malaysia’s government move to impose the controversial departure levy for all travellers departing from the country’s airports from September 1 despite protests and calls to postpone its implementation.
The government announced the new tax in a gazette published on July 31 with the Ministry of Finance (MoF) fixing the rates, which depend on the destination and whether travellers are in economy class or premium.
Different rates
Air travellers from Malaysia to ASEAN countries in economy class will be charged RM8 (US$1.90) in departure tax while those in other classes will have to pay a RM50 (US$11.90). The ASEAN countries, including Malaysia, are Laos, Myanmar, the Philippines, Brunei, Cambodia, Indonesia, Thailand, Vietnam and Singapore.
For those heading to other countries outside of the ASEAN region they have to fork out RM20 (US$4.80) if they are in economy and a hefty RM150 (US$36) in premium.
The levy is over and above the current passenger service charge (PSC) of RM35 and RM73 for outbound travellers to ASEAN and the rest of the world respectively.
Proposed in Budget 2019, the government said the levy was intended to encourage the development of domestic tourism and, of course, to supplement the nation’s coffers. Proceeds from the levy is expected to rake in RM1 billion yearly for the country.
That is why the MoF did not heed the numerous calls by the tourism ministry, tourism stakeholders and trade associations to put off its implementation so that air travellers and the travel industry can get used to the system, and also the fact that Visit Malaysia 2020 is just a mere five months away.
The International Air Transport Association (IATA) too had joined in the call. In April it urged the government to reconsider imposing the tax due to its potential to do more harm than good to the Malaysian economy, as it would dampen travel demand. (Read story here)
(Image credit: Pierre Aden/Getty Images)
Impact on travel
There is also concern on how and where the levy will be collected – whether through the airports or as part of airfares – as the MoF did not spell out the mechanics in its announcement.
This is one of the question from Tunku Iskandar Tunku Abdullah, group executive chairman of Melewar Group, a Malaysian business conglomerate with travel companies in its stable, with whom WiT spoke with on the issue in April when Malaysia’s Parliament passed the Departure Levy Bill 2019.
“Has the Ministry of Finance engaged with the tourism industry (on the levy) implementation?” he asked. Obviously not, as everyone, from the travel trade and travellers, only found out about the implementation with the ministry’s announcement.
Tunku Iskandar noted that by going ahead with the levy, MoF seems not to agree with the Minister of Tourism, Arts and Culture Datuk Mohamaddin Ketapi. This is because the minister told Parliament in June that he wanted the levy to be put on hold until after Visit Malaysia 2020.
However, the latest stance from the tourism ministry is it is backing the tax’s implementation. Datuk Mohamaddin was quoted in a report in The Star that he “fully supported” the implementation, after discussion with the finance minister, as it is “for the development of the country”
Tunku Iskandar: “We should not be over-milking the tourists who actually bring in tourist dollars.”
When asked if the RM150 levy for premium class to non-ASEAN countries was too high and would impact business travel Tunku Iskandar replied: “It really depends how much this RM150 is in relation to the airfare. If you buy a RM15,000 Business Class ticket on Malaysia Airlines to London, that represents 1% (so probably not much impact), but if you buy a RM3,000 Business Class ticket on Malindo Air to Sydney, that represents 5% (probably it is seen as significant).”
On the whole he feels it would have some negative impact, but business people usually travel on company business so they will still fly regardless of the levy.
The same, however, could not be said for leisure travel especially with the country stepping up promotions to draw tourists to its shore for Visit Malaysia 2020.
“It (levy) will be a dampener for travellers from low-cost non-ASEAN markets like India and China where the airfare has been purchased at rock-bottom prices,” noted Tunku Iskandar.
As for the government’s intention to promote domestic tourism with imposing more taxes for outbound traveller he said it might not work “because those who have already decided to experience a foreign destination will still do so.”
However, these outbound travellers may feel the pinch with having to pay the extra tax especially for those who shop around for the best/lowest air fares or a large family planning a vacation overseas. But knowing how Malaysians love to spend holidays and long weekends overseas, especially within ASEAN, they will (eventually) accept the new tax after some initial hue and cry.
Tunku Iskandar suggested giving a waiver of the levy for foreign travellers or at least staying in the country for 72 hours or less or, according to his friend, remove the levy for those staying more than 24 or 48 hours.
He is adamant, as in his previous comments to WiT, that tourists should not bear the burden of meeting the government’s needs for extra money.
“We should not be over-milking the tourists who actually bring in tourist dollars. Has the Ministry of Finance calculated and assessed the trickle-down impact of every tourist dollar spent in the country and what might be the impact of levying these charges?”
On a personal note, Tunku Iskandar said as a frequent flyer and corporate traveller the levy would not have any dampening effect on his travels.
Meanwhile, the Malaysian Association of Tours and Travel Agents (MATTA), which has been asking for the tax to be delayed, called again for the levy’s postponement until after Visit Malaysia 2020. This will give time for the mechanism to be worked out and for MoF to engage with tourism stakeholders. There is also concern inbound tourism may be adversely affected and the 30 million tourist arrivals target might not be met.
Its president Datuk Tan Kok Liang was quoted as saying the association was “not for or against the levy. All we are asking is for it to be deferred.”
Other countries in Asia that are charging visitors a departure tax include Singapore (US$34 – includes a new tax levied to fund airport expansion), Thailand (US$20), Hong Kong (US$15) and Japan (US$10).
Exemptions
The MoF has exempted certain categories from paying the levy. It will not be imposed on infants and toddlers aged below 24 months; aircraft passengers transiting via Malaysia with the transit period not exceeding 12 hours; any crew on duty on board any vehicle (including aircraft or vessel) and anyone driving or riding any type of vehicle for personal use (including aircraft or vessel) and pillion riders or passengers of such vehicles.
• Note: Rate of conversion of Malaysian ringgit to foreign currencies is at press time
• Featured image credit: 06photo/Getty Images
