KUALA LUMPUR: Some market observers are not overly pessimistic about the government’s proposal to impose a departure levy for all outbound passengers, possibly to be enforced after the Haj’s season this year.
Although the government has yet to iron out the tax rate, it was reported that the rate to be charged on every international departure from Malaysia was RM20 to Asean countries and RM40 to other international destinations.
Aviation experts believed that the levy allows the government to widen its revenue base in line with its intention to diversify its revenue sources.
They said the initiative would provide a “surplus” to the government’s income with the potential to upgrade or expand and improve airports throughout the country.
Maybank Investment Bank Bhd aviation analyst Mohshin Aziz said the tax collection would enable the government to further develop the local aviation infrastructure in terms of building human capital (education) and upgrading airports facilities.
“Therefore, this would improve the overall operation efficiency at airports throughout the country. The departure levy is more targeted at the population who are capable to pay tax rather than the blanket tax.
“This is the government’s rationale to have targeted type of taxing mechanism, especially for those who use the airport facility,” he told the New Straits Times on Friday.
Mohshin is hopeful that the tax collection would be channelled into making local airports better. This is by expanding congested airports, as well as spending on better radar and more satellite navigation systems.
“Better aviation infrastructure will improve the overall airports and airlines operating in the country such as seamless passengers flow at check-in counters and smoother aircraft take-off and landing at the runways,” he added.
Mohshin said the tax collection also can be used to develop the aviation industry to greater level. For instance, building human capital development such as provide training for pilot, cabin crew, engineers, and air traffic controllers to improve their competency.
He said the levy would not likely to impede air travel growth, citing that Hong Kong and Singapore already imposed the transit, departure and developments taxes to air travellers at their respective airports in those countries.
“Ever since then, air traffic growth in those countries is not severely impacted but rather maintains its growth on a yearly basis,” he said.
Despite the backlash from some quarters, governments persisted to impose air travel levies as the administration would have different ways to develop their local aviation market.
“It seems to be more stable than what people fear for. But the reality was different that the negative reactions highlighted,” he said.
The NST previously reported that the government was expecting to gain a few hundred millions of ringgit annually from this departure levy for all outbound travellers.
Transport Minister Loke Siew Fook said the government had yet to finalise whether the impending departure levy will be added in the passenger service charge (PSC) or customs/immigration.
He said the departure levy was not new in other countries such as in Thailand and Japan but the implementation would be new in Malaysia.
Currently, the PSC is paid to Malaysia Airports Holdings Bhd (MAHB) as the airport operator, to run airports’ operation.
The current PSC charges are RM35 and RM73 for outbound travellers to Asean and other international destinations respectively.
Former Transport Ministry secretary general Tan Sri Dr Ramon Navaratnam said air travellers can afford to pay additional levy provided the charges are comparable to other airports in the region.
“The government should proceed with the departure levy because the country should have more progressive taxation, where the richer citizens pay more taxes.
“However, passengers/customers also expect better services,” he said, adding that the government should explain the rationale behind imposing new taxes.
He said the rich should be taxed more, especially for those first and business class travellers.
Sunway University economics professor Dr Yeah Kim Leng concurred that the levy would not impede air travel growth locally, citing that the taxing mechanism would fuel the government’s income to grow the local aviation sector.
“Given that the impact will not likely be significant, generally, business and leisure travellers wouldn’t mind paying extra and it is not a burdensome,” he said.
Dr Yeah said the government can utilise the tax collection to refurbish and upgrade airports in the country, which in turn would benefit air travellers in using the airports facilities.
“Passengers wouldn’t mind paying higher departure tax as long as they will benefit from better quality services and connectivity,” he added.
However, the International Air Transport Association (IATA) had recently urged Malaysia to reconsider imposing a departure levy for all outbound travellers in the country.
Its regional vice-president for Asia-Pacific Conrad Clifford noted that the departure levy has the potential to do more harm than good to the Malaysian economy.
“While the intention is to raise revenue for the government in the short run, it needs to be recognised that aviation is a catalyst for economic growth, and any action that dampens the demand for travel will also hurt the industry’s economic contributions to the country,” he added.
Based on IATA’s analysis, the introduction of the levy would reduce the number of international air passengers departing Malaysia by up to 835,000 per year, decreasing the aviation sector’s gross domestic product (GDP) contribution by up to US$419 million and see a reduction of up to 5,300 jobs.
IATA cautioned that the imposition of the levy would also erode Malaysia’s competitiveness as a tourist destination in the region to the detriment of its economy.
In 2017, Malaysia’s aviation sector supported 450,000 jobs and contributed US$10.1 billion to the country’s GDP.
The broader tourism sector accounted for 13.4 per cent of GDP, which is significantly supported by air transport, according to IATA.