Friday 29 Mar 2024
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KUALA LUMPUR (April 11): The International Air Transport Association (IATA), a grouping of 290 airlines including Malaysia Airlines and Malindo Air, has urged Malaysia to reconsider the imposition of a departure levy on air travellers leaving the country.

According to its regional vice-president for Asia-Pacific Conrad Clifford, the departure levy has the potential to do more harm than good to the Malaysian economy.

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.

Starting June 1, passengers flying to Asean destinations will have to pay a departure levy of RM20 and RM40 for those travelling to non-Asean countries.

"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,” said Clifford in a statement today.

He also warned that the imposition of the levy would 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% of GDP, which is significantly supported by air transport, said IATA.

The association also pointed out that the levy contradicts accepted policies on taxation published by the International Civil Aviation Organization (ICAO).

“As an ICAO council member, Malaysia should demonstrate leadership in adhering to ICAO’s policies,’ said Clifford.

“We strongly urge the Malaysian government to reconsider the levy and abandon the plans to introduce it,” he added.

IATA had previously submitted a paper dated Nov 23, 2018 to Finance Minister Lim Guan Eng, calling on the government to reconsider its decision and not proceed with imposing the levy.

It noted that each departing international passenger already pays a total of RM74 in aviation charges (RM73 for passenger service charge and RM1 for Mavcom service charge).

"However, with the imposition of the departure levy, the amount of charges and taxes paid by each departing international passenger from Malaysia would increase to RM94 to Asean destinations and RM114 to all other international destinations," it said.

"Moreover, Malaysia already introduced the tourism tax in September 2017 on accommodations provided to foreign tourists at a rate of RM10 per room night. As a significant number of foreign tourists travel to/from Malaysia by air, the imposition of the departure levy would be duplicative and subject only tourists travelling by air to unfair and inefficient double taxation," added IATA.

Without adherence to the various ICAO principles, IATA said international aviation would become financially overburdened by excessive and unjust taxation, which in turn would significantly limit the economic and social benefits generated by air transport.

If indeed a withdrawal is not possible, IATA has proposed three alternatives associated with the levy. One is to impose a single tax rate of RM20 per departing passenger to all international destinations.

Secondly, Malaysia can consider implementing the levy on a sales basis as of the effective date as opposed to implementing on a passenger flown basis.

Alternatively, the government can consider exempting infants and children under 12 years, transfer/transit passengers and those on second departures due to involuntary rerouting from the departure levy.

Malaysia will not be the first country to impose a departure levy. Travellers leaving Japan now pays a "Sayonara levy" of 1,000 yen (RM36), while those flying out of Singapore will have to pay S$47.30 starting July 1, up from the current RM34.

 

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