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Malaysia’s copycat pocket pinching
August 9th 2019
Government says new departure fee is comparable with regional peers. Read More »
Filling government coffers comes with an earful. Malaysia has finalised a revised international departure tax, prompting dissatisfaction from International Air Transport Association (IATA) and AirAsia while regional governments are lobbying to keep the funds imposed by central government order.
The tax shows the danger of the industry losing tax increases elsewhere. After higher charges in Hong Kong and Singapore, the Malaysian government justifies the new levy by saying Malaysia’s charges will be cheaper or comparable with regional peers. But this will still reduce Malaysia’s competitiveness, IATA warned in a statement. “We are disappointed with the implementation of the Air Passenger Departure Levy,” it said.
The charges are split by region and class of travel. Within ASEAN, economy class is charged US$2 and non-economy $12. For flights outside of ASEAN, economy class is charged $5 and non-economy $36. Usual provisions apply excluding infants and crew, but transit passengers are only excluded if their connection is under 12 hours instead of the more typical 24. The charges are to be collected from September 1.
“The levy also contradicts accepted policies on taxation published by the International Civil Aviation Organization,” IATA said. IATA also argues the sensible principle that higher charges reduce demand. That is partially Malaysia’s objective: the new levy will be used to support domestic tourism. Domestic flights will not be charged the levy.
How will domestic tourism be supported? Regional governments would like to know. While waiting, they already have made suggestions. Sabah wants at least half of the charges collected in its state to be re-allocated back to its state government. An even split between state and national coffers would replicate the appropriation of a recent levy on hotel accommodation. This would at least provide some benefit, unlike the contentious and high UK APD fees that are not used for transport, infrastructure or environmental initiatives.
While Sabah is asking for funds, the state also is uncertain if the levy will hurt visitor arrival figures. “I know that other ASEAN countries also impose this but I don’t know how it will affect us until the first quarter of it being imposed. My concern now is whether we will get any of the funds,” Sabah deputy chief minister, Datuk Christina Liew, told the Malay Mail. She added that the state was unaware of the levy before its announcement. “I was in the dark, I didn’t know,” she said.
AirAsia executive chairman Datuk Kamarudin Meranun wrote on Instagram AirAsia was collecting higher charges “under protest”.
“The tragedy will be that we are likely to lose our position as a low-cost hub,” he wrote. “That will be a loss to the country and to our hospitality industry. This, MAHB, is on you.” AirAsia is in a court battle with Malaysia Airports Holdings Bhd (MAHB) about a separate charge increase that AirAsia refused to collect from passengers but has been ordered by a court to pay.
Air France denounced a new eco-tax announced in July by its government and partial shareholder. Yet state-owned Malaysia Airlines (MAS) has said nothing about the charge. MAS is wholly-owned by a government vehicle, and management hopes its restructuring plan will be chosen by the government instead of competing alternatives.
