A strong future for a competitive Australian tourism industry

Transcription

1 A strong future for a competitive Australian tourism industry January 2013 National Tourism Alliance Suite 102, 515 Kent Street (tel) Sydney NSW 2000 info@tourismalliance.org

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3 Executive Summary Tourism is one of Australia s most significant industries and an integral component of the Australian economy, contributing $35 billion, or 2.5 per cent of Australia s GDP. Tourism and hospitality employ over million Australians. Tourism generates $23.7 billion in export earnings - representing 8 per cent of total exports. Tourism makes a valuable contribution to regional Australia, with 46 cents in every dollar of tourism expenditure being spent in regional Australia. Tourism related employment in regional areas generated over 220,000 jobs in Visitors and travellers spend over $95 billion a year in Australia; almost 20 per cent of this is spent on hospitality in restaurants in cafes, pubs, bars and clubs. Tourism provides more jobs for Australians than mining and agriculture, forestry and fishing. But more important than the numbers is the impact that tourism and travel have on every facet of Australian life. Through leisure, education, cultural and sporting tourism, the tourism sector plays an important role in shaping our national identity, sharing our culture and influencing global perceptions of Australia. Like other industries, tourism and hospitality seek growth for their businesses and their sector as a whole. As a significant employer of a million people, with a large proportion of small businesses and regional representation, these sectors have the ability to continue to employ people and breathe economic, social environmental and cultural value into regional and urban areas alike. To reach their growth potential, these sectors need the Commonwealth Government to assist in the following manner: An unambiguous recognition and acknowledgement by Government of the nature of the tourism and hospitality sectors and their contribution to the economy. Establish machinery of Government mechanisms to reflect the importance of tourism, hospitality and events to the economy, to coordinate national regulation reforms and consistency. Provide strategic investment where appropriate and implement regulatory reform. A commitment to implementing policies aimed at achieving defined industry objectives. Page 1

4 Priority 1. Whole of Government Coordination across Tourism Appoint a Minister responsible for tourism and hospitality who has a whole of Government support for the portfolio, and whose agencies are resourced and mandated to market Australia and to improve whole of Government policy coordination to grow tourism and hospitality. a) Reaffirm Tourism Australia's role as the national marketing agency. b) Ensure structures are in place to implement policy more effectively and ensure cross-portfolio, whole-of-government coordination. Priority 2. Alleviating the Tax & Regulatory Burdens on the Tourism Industry a) Commit to review the Passenger Movement Charge and its application. b) Commit to no new taxes or increased charges applied specifically on tourism and related transport infrastructure. c) Reduce regulatory burdens that make new and existing tourism property development less attractive. i. Establish 50 per cent capital works deduction bonus, with the remaining 50 per cent spread over 12.5 years at 4 per cent. ii. Reforms to the Building Code of Australia where tourism developments are disadvantaged. Priority 3. Attract, develop and retain the right number of people with the right skills in tourism and hospitality a) Ensure that gaps in domestic skills and labour are met through long-term skills and careers development. b) Provide tourism and hospitality operators with greater access to other short-term sources of skilled workers. c) Establish an effective system of workplace regulation that recognises the 24/7 nature of tourism and hospitality. Page 2

5 Priority 4. Investment, Infrastructure and Product Development a) Continue to provide funding for a national tourism development program, and ensure grants are linked to Destination Management Plans. b) Maintain Tourism Research Australia's independence, with the brief to include research, interpretation and analysis, extension/outreach to deliver to the needs of the industry. c) Improve the quality of the traveller's experience at border processing points. Priority 5. Marketing and Events a) Maintain real value of Tourism Australia funding in the forward estimates. b) Support the attraction of international Business Events, recognising the importance of these events to tourism and, and the broader economic returns. c) Review the EMDG scheme to bring it into line with current in both the Australian export market focus and export practices. Tourism has a clear agenda with the T2020 Strategy, which requires an ongoing partnership between government and industry. With these shared agenda and goals clearly in mind, the National Tourism Alliance presents its 2013 Budget Submission to the Federal Government. Page 3

6 Table of Contents Executive Summary... 1 About the National Tourism Alliance Background Tourism in Australia Reaching our Potential A Role for Federal Government The Current Fiscal Situation Whole of Government Coordination across Tourism Building on International Examples / Case Studies The US Taskforce on Travel and Competitiveness The US Office of Travel and Tourism Industries Domestic calls for whole-of-government Coordination Building on Worlds Best Practice Alleviating the Tax and Regulatory Burdens on the Tourism Industry Quantum of Tourism Industry Taxation Specific Taxes Affecting Tourism Passenger Movement Charge (PMC) Carbon Tax GST and Associated Regulations (including TRS regulations) Tourist Refund Scheme (TRS) Payroll Taxes (State) Cost Recovery Fees/Charges/Regulations Affecting Tourism Visa Fees Partial Cost Recovery of Community Policing at International Airports Other Barriers to Investment Attract, Develop and Retain the Right Number of People with the Right Skills in Tourism, Hospitality and Events Long Term Skills and Career Development Other Short Term Sources of Labour Working Holiday Maker Visas Overseas Students Page 4

7 4.5 Skilled Migrants Workplace Regulation Investment, Infrastructure and Product Development Importance of Tourism Development Plans Tourism Research Australia Passenger Facilitation: Improving the Traveller's Experience Marketing and Events National marketing is essential Business Events Maintaining a competitive position globally Funding for Tourism Australia Export Market Development Grants Scheme (EMDG) Major Changes in Export Tourism EMDG Role in Developing Tourism Exports & Australian Export Sector ADDENDUM Page 5

8 About the National Tourism Alliance The National Tourism Alliance (NTA) provides a single message to the Federal Government on issues of common interest for Australian tourism and hospitality, representing businesses nationally from the following sectors: AAA Tourism Accommodation Association of Australia Australasian Casino Association Australian Regional Tourism Network Australian Tourism Export Council Board of Airline Representatives of Australia Inc. Bus Industry Confederation Caravan, RV & Accommodation Industry of Australia Queensland Tourism Industry Council Restaurant & Catering Australia South Australian Tourism Industry Council Tourism Council ACT and Region Tourism Council Western Australia Tourism Industry Council NSW Tourism Industry Council Tasmania Victorian Tourism Industry Council Page 6

9 1. Background 1.1 Tourism in Australia Tourism contributes over $35 billion to Australia s GDP and employs over 513,000 Australians directly. Tourism is Australia s largest services export industry, providing 8 per cent or $23.7 billion of Australia s total exports. Visitors and travellers spend over $95 billion a year in Australia; almost 20 per cent of this is spent on hospitality in restaurants, cafes, pubs, bars and clubs. Tourism is a highly dispersed sector and makes a valuable contribution to regional Australia, with 46 cents in every dollar of tourism expenditure being spent in regional Australia. Tourism related employment in regional areas generated over 220,000 jobs in Tourism provides more jobs for Australians than mining and agriculture, forestry and fishing. Over 93 per cent of businesses within the sector are small and medium enterprises. More than 100,000 Australians own a profitable and innovative tourism business. Over 1,000,000 Australians choose tourism and hospitality as a career - a sector that provides mobile, challenging, ever-changing employment opportunities. Tourism and hospitality employ over million Australians. Tourism also has significant flow-on effects to other areas of the Australian economy. For every additional dollar of value added generated by activity in the tourism industry, a total of $1.91 of value added is created, ahead of other industries such as mining, retail trade and education and training. Tourism is a broad sector and incorporates visiting family, friends, business associates and places outside one s immediate environment as well as receiving visits from people from other regions and other countries. Tourism is the economic activity generated by visitors travelling to, and staying in, places outside their usual environment for leisure, business and other purposes. By definition, tourism activity cuts across multiple industries and ancillary services, notably accommodation, restaurants and cafes, transport, arts and recreation and education and training, and further encompasses the visitor journey both to and within a destination. The term tourism in international standards is not restricted to leisure activity. It also includes travel for business or other reasons (such as education) provided the destination is outside the person s usual environment. The persons referred to in the definition of tourism are termed visitors. A visitor is defined as: any person travelling to a place other than that of his/her usual environment for less than twelve months and whose main Page 7

10 purpose of trip is other than the exercise of an activity remunerated from within the place visited. Tourism can therefore partly be defined according to the status of the consumer that is, it is the characteristics of the consumer that determine whether the production is included within the scope of tourism. Understandably, this makes tourism difficult to conceptualise as an industry, as a business may be serving both tourists and visitors as well as local residents, and may not differentiate itself as a tourism business even though a part of its income is obtained from tourism business. On the supply side, tourism combines the inter-related activities that produce goods and services for tourists, such as accommodation, education, retail, transport of all forms, and other services such as cultural institutions and sports or recreational services. Again, many of the businesses or institutions involved may be serving both tourists and local residents. Consequently, it is difficult to separate these elements when considering the economic value and contribution of tourism. 1.2 Reaching our Potential There is no question that the past decade has been a challenging period for Australian tourism. Since 2000, the industry has experienced a highly volatile environment, with exposure to external factors such as natural disasters (earthquakes, bushfires, tsunamis, severe storms) and outbreaks of disease both domestically and internationally. With the backdrop of recent instability in global economic conditions has also added pressure on the Australian tourism sector. The result of this pressure can be seen in the significant declines in visitor numbers from traditional markets (such as the United Kingdom, the United States and Japan) that have faced their own difficult economic circumstances. While there has been some measure of recovery in these markets, the ongoing strength of the Australian Dollar continues to provide strong incentives for Australian travellers to look abroad, not domestically, for travel options. Whilst Australian tourism has shown significant resilience to recover from these external factors, the sector is undergoing a period of significant structural adjustment. The transformation of the global economy, particularly the increase in incomes and wealth across north-east and south-east Asia, presents many opportunities for growth in inbound tourism to Australia from countries in our region. Page 8

11 According to recent forecasts of the Tourism Forecasting Committee, inbound tourist numbers from Asia, particularly China, India and Indonesia, are expected to be grow at a significant rate. In order to capitalise on this potential market and reach the Tourism 2020 goal of growing demand from Asia, by driving growth in visitor numbers and expenditure, a significant marketing investment is paramount. In this highly competitive global marketplace, it is vital that Australia maintains and improves its competitive position by way of significant funding for national marketing agencies. Australia is also facing pressure from competitor destinations in an increasingly competitive environment. Competitor destinations are investing heavily in marketing and product development. For example, both Canada and the United States have received Approved Destination Status from the Chinese Government. The recently created United States Corporation for Travel Promotion (Brand USA) is focusing on key marketing expenditure on growth markets including China and India. United States President, Barack Obama announced an Executive Order to establish a National Tourism Strategy alongside new visa processing goals. The Strategy recommends policies to promote domestic and international tourism, with the goal of increasing the United States market share of worldwide travel, including obtaining a greater share of long-haul travel from Brazil, China, and India. This will be United States first National Tourism Strategy. The NTA believes that a similar approach is crucial if Australia is to remain competitive. Whole of Government policy coordination is necessary to ensure structures are in place to implement policy more effectively and ensure crossportfolio coordination. 1.3 A Role for Federal Government The NTA believes that the Federal Government has a pivotal role to play in helping Australian tourism reach its potential. The diffuse nature of the tourism sector, coupled with the importance of destinations as the product, necessitate a significant degree of coordination. There needs to be: Effective and strategic policy leadership across the tourism and transport portfolios as well as a range of other portfolios that intersect and impact on tourism; Page 9

12 More effective partnering with industry and State and Territory agencies to deliver outstanding tourism marketing and promotions; Continued investment in research, development, analysis and extension/outreach to deliver to the needs of the industry; High quality service delivery in areas such as passenger facilitation and visa processing to meet or indeed exceed traveller expectations; A focus on labour market, skills and training and migration policies to ensure a highly skilled and flexible workforce; Delivery of vital infrastructure, including transport links, to support tourism development in key tourism gateways and destinations; Well-targeted support for innovation through development grants and small business programs. 1.4 The Current Fiscal Situation The NTA is mindful of the fiscal constraints on the Government resulting from the current instability in the global economy. The sector is also acutely affected by the conditions that are buffeting some of our key inbound tourism markets. And while we understand that in a climate of fiscal constraint, the need to prioritise becomes paramount, it appears that promoting a competitive Australian tourism sector has not been a priority for this Government over recent years. Whilst we understand the need to prioritise as a consequence of fiscal constraint, we believe the differing treatment of tourism compared to other industries is to the detriment of the industry and consequently, the Government s bottom line. Tourism contributes $35 billion, or 2.5 per cent of Australia s GDP and generates $23.7 billion in export earnings representing 8 per cent of total exports. Over recent years, the Government's approach to Australian tourism contrasts with the support provided to other sectors of the economy. Unlike other sectors however, tourism has always been an open economy industry; it has never been shielded behind tariff walls, nor has it been afforded decades of government assistance. For decades, successive Federal Governments have been generous in their support of many industries, particularly agriculture and manufacturing. The tourism industry remains the only export sector in Australia whose exports continue to be subject to GST. The additional taxes imposed on the industry (Passenger Movement Charge and a range of visa fees) has only amplified and added further pressure to Australia s ability to compete internationally. Page 10

13 2. Whole of Government Coordination across Tourism Tourism represents Australia s largest services export industry and touches upon many areas of economic activity including travel, shopping, accommodation, events and education. The wide scope of the sector means that no single agency has full regulatory ownership of the industry or policy control to influence future industry design factors. o Australian tourism had a Gross Domestic Product (GDP) of $34.6 million and provided approximately 513,700 jobs (4.5 per cent of all Australian jobs); 1 o Tourism also has a direct impact on other sectors of the economy, including manufacturing. Every one-dollar increase in tourism output generates an additional 92 cents in output across the rest of the economy. 2 The visitor economy is not a single sector, and is driven by the end consumer. This requires a much broader base to deliver on key objectives and the needs of the industry and travellers alike. Government plays a key role in connecting industry and travellers, with the Government owning or controlling many of the services that are essential to the success of the tourism industry. Better partnership between industry and Government stakeholders is required to unlock the full potential of the visitor economy for Australia. A key to ensuring that tourism and hospitality remain competitive and viable that can deliver strong economic outcomes is a whole-of- Government approach, working in partnership with industry and other key stakeholders. The wide scope of the tourism sector means that policy responsibility for tourism extends across the Federal Government, with no single department or agency having full policy ownership of the tourism portfolio. A silo approach to tourism, and without a clear whole-of-government commitment, has led to a lack of consistency in policy and processes, and unnecessary red tape. This has inhibited innovation, investment, and development approval has severely restricted the ability of industry to respond to the growing need of more hotel accommodation in Australia. 1 Tourism Research Australia, Tourism Industry Facts and Figures at a Glance September Tourism Research Australia, Tourism s Contribution to the Australian Economy from to Page 11

14 It is imperative that Government departments and agencies change their culture and proactively focus on more active encouragement and support for industry innovation, entrepreneurship and excellence. By understanding the regulatory complementarities within tourism, Government can better coordinate its approach to meeting the challenges of growing competition from overseas destinations and better identify new opportunities for tourism growth. In particular, a high level of coordination between DRET (including Tourism Research Australia), Tourism Australia and Central Government Agencies (including PM&C and Treasury) will allow for better data sharing, funding allocation and identification of strategic tourism opportunities. An effective dialogue between Government and industry will combine the Government s top-down perspective with the industry s first-hand experiences, to build an integrated and holistic approach to tourism development. The NTA members submit that: The tourism portfolio requires a greater level of cooperation between key central and line Government Departments and Agencies. Policy coordination across the tourism portfolio requires a greater level of structure within a rigorous framework that involves key policy decision makers. Better policy coordination should recognise the need for a broad base of policy development, which recognises that the visitor economy is not a single sector and is driven by the end consumer. 2.1 Building on International Examples / Case Studies In order to maintain its competitiveness in the highly competitive travel and tourism industry, Australia must act quickly. Other nations, such as the United States (US), are strategically targeting key markets in the Asia-Pacific region in direct competition with Australia. Page 12

15 Enhanced policy coordination is central to the US s push for a greater proportion of Asia-Pacific visitors. This arose from a need to build a more unified approach across Government to enhance the tourism industry. 2.2 The US Taskforce on Travel and Competitiveness In January 2012, the White House announced a Presidential Policy Directive calling for better promotion of US tourism and increased visaprocessing capacity for visitors from China and Brazil (an increase of 40 per cent over a 12-month period). 3 The US has committed to a whole-of-government approach and has called for an interagency process to coordinate the implementation of regulatory improvements to enhance travel to the US. The Presidential Directive established a cross-government Taskforce on Travel and Competitiveness comprising members from a spectrum of portfolios including the Departments of Treasury, Agriculture, Labor, Transportation, Homeland Security, Army Corps of Engineers and the Export-Import Bank. The Presidential Directive charged the Taskforce with developing a National Travel and Tourism Strategy to deliver new policies and initiatives promoting domestic and international travel. The Taskforce s goal was to increase the United States market share of worldwide travel. The final strategy, released by the Taskforce in May 2012, presents a robust Government-wide plan, not mere industry directives, to foster greater cooperation and integration in delivering tourism outcomes. 2.3 The US Office of Travel and Tourism Industries The Office of Travel and Tourism Industries ( the Office ), within the US Department of Commerce, is tasked with enhancing the international competitiveness of the US travel industry and increasing exports. The Office serves as a central cross-government agency that is responsible for the management of tourism statistical systems, administration of 3 The White House, Office of the Press Secretary, Executive Order- Establishing Visa and Foreign Visitor Processing Goals and the Task Force on Travel and Competitiveness, 19 January 2012, Washington DC. Page 13

16 export expansion activities, the development of tourism policy and advocacy, and the provision of technical assistance for expanding international tourism. 4 The Office also represents US interests in intergovernmental organisations (including APEC, the United Nations World Tourism Organization and the OECD Tourism Committee) and promotes US tourism through bilateral agreements with countries of strategic importance. The office has previously coordinated a Memorandum of Understanding with China on group leisure travel. Further supporting an integrated, whole-of-government approach is The United States Travel and Tourism Advisory Board. The board acts as a liaison between government and the travel industry and provides a forum for stakeholders on current and emerging issues in tourism. The board advises the Secretary of the Department of Commerce on policies affecting US tourism and recommends strategies to ensure that the United States remains a preeminent international destination. The NTA members submit that: Australia must improve tourism coordination across Government to avoid losing market share to competitors such as the United States, whose strategy is built upon a sustained high level of close Government coordination and commitment. 2.4 Domestic calls for whole-of-government Coordination Recent strategic reviews of the travel and tourism industry in Australia have also recognised the need for a greater level of whole-of- Government policy and program coordination. The New South Wales (NSW) government released the final report of the Visitor Economy Taskforce ('the VET Report') in August The VET report made a series of recommendations with the purpose of helping the NSW 4 US Department of Commerce, Office of Travel and Tourism Industries, About OTTI, sourced 5 October 2012 at Page 14

17 Government's objective of doubling overnight visitor expenditure by The VET report recognised the need for greater policy coordination across the NSW Government, stating that 'the absence of a whole-of- Government approach is partially responsible for some of the inertia, particularly in the area of investment for the visitor economy'. 5 The VET report made several key recommendations to enhance wholeof-government coordination across the visitor economy, including: o Recommendation 41: Adopt a proactive whole-of-government approach to improve consistency in policy and processes and cut red tape to drive innovation, investment and growth'; o Recommendation 43: Establish a sub-committee of Cabinet to oversee the progress of visitor economy priorities across Government; o Recommendation 45: That a sub-committee of the Board of Destination NSW meeting with Government-nominated industry representatives, at least twice yearly, under the chairmanship of the Chairman of Destination NSW, to jointly assess the overall implementation of the Plan and report to Government, including recommending any necessary adjustments to the Plan. 6 The NTA members submit that: The NSW VET Report recommendations for whole-of-government cooperation be considered and adopted in a Federal Government context. In particular, a Cabinet sub-committee would ensure decision makers with policy responsibility that impacts the tourism industry. 2.5 Building on Worlds Best Practice More than ever, Australian tourism needs a stronger, better-focused and coordinated approach to policy and programs across Government. The visitor economy is not a single sector; rather it is driven by the needs and 5 NSW Visitor Economy Taskforce Final Report, Strategic Imperative 7: Change of Mindset, NSW Department of Trade and Investment, August 2012, p Ibid, p. 126 Page 15

18 actions of the end consumer. Better working partnerships between industry and Government stakeholders are required to unlock the full potential of the visitor economy for Australia. Better coordination will improve consistency in policy and processes, cut red tape, and compel innovation, investment and growth across the industry. Furthermore, greater coordination will provide greater operational flexibility to peak tourism agencies, which will enable them to operate more effectively in an agile and commercially competitive manner. The NTA members submit that: Better outcomes-driven coordination is required across and between Governments, led by a Cabinet Sub-Committee and a re-instated Tourism Ministers Council involving all States and Territories. This Cabinet sub-committee should oversee coordination at both the strategic (Cabinet and Ministerial) and the tactical (Departmental and Agency) levels, to ensure that enhanced coordination leads to better outcomes for the industry and for domestic and international visitors to Australia. This Cabinet sub-committee should be charged with the delivery of the strategy to enable Australia to meet the 2020 Tourism industry potential targets. Page 16

19 3. Alleviating the Tax and Regulatory Burdens on the Tourism Industry Tourism is highly exposed to global economic factors, including shifts in the exchange rate and the impact of financial turbulence in the global economy. Tourism exports are particularly impacted by narrow-based taxes and charges such as the Passenger Movement Charge (PMC) and a range of Visa Fees. Tourism and hospitality are diverse and fragmented, covering many sectors and areas of economic activity. It is also highly labour intensive sector, employing over million Australians. Historically, this has meant that there has been no uniform regulatory treatment across the tourism sector. Inconsistent regulatory treatment has the potential to distort genuine economic activity and can result in uneven patterns of investment. Although tourism is extremely valuable to the Australian economy, it also bears a significant tax burden, with net tourism taxation in 2003/04 of $6,922 million (equating to 19.6 per cent of tourism gross domestic product). 7 With one price elasticity estimate of , tourism is extremely sensitive to taxes and regulatory burdens. Fundamental to the ongoing success of the tourism sector is the need to remove unnecessary barriers arising from taxation or regulatory regimes. The NTA and its members: Strongly oppose any new taxes or charges on tourism. Seek a review of some of the existing taxes and charges as to their level, relevance and validity. 7 Sustainable Tourism Cooperative Research Centre, State and Federal Taxes on Tourism in Australia estimate for 2003/04. 8 Geoff Carmody& Associates, Australian Tourism: How Deep the Recession, March 2009, pg Page 17

20 3.1 Quantum of Tourism Industry Taxation Research undertaken by the Sustainable Tourism Cooperative Research Centre (CRC) relating to the 2003/04 year identified that net revenues from tourism taxation can be divided into three streams: State Taxes, Federal Taxes and GST 9. GST is by far the largest contributor to tourism tax revenue, accounting for 65 per cent or $4, million. Figure 1 provides a breakdown of taxes levied on the tourism industry, broken down by level of Government. Taxes levied on the tourism industry Millions of $ /04 Source: Sustainable Tourism Cooperative Research Centre $ % $1, % GST Federal Taxes State Taxes $4, % For every $ of tourism expenditure in Australia, $9.10 is paid to Federal, State or Local Governments in revenues net of any subsidies provided. Each $9.10 of net tax revenue is comprised of: State taxes on production ($1.10) State taxes on products ($0.90) State subsidies on products (-$1.20) Federal taxes on production ($0.20) Federal taxes on products ($2.30) Federal subsidies on products (-$0.10) GST ($5.90) 9 Sustainable Tourism Cooperative Research Centre, State and Federal Taxes on Tourism in Australia estimate for 2003/04. Page 18

21 The NTA members submit that: Tourism Research Australia (TRA) should undertake an updated analysis of the current tax landscape across the tourism industry. The industry requires a reputable and contemporary analysis of the current tax burden borne across the Australian visitor economy. 3.2 Specific Taxes Affecting Tourism Various Commonwealth and State taxes affect Australia's tourism industry. These include, but are not limited to: Passenger Movement Charge (PMC); The Clean Energy Future legislative package (the Carbon Tax); GST and associated regulations (including the Tourist Refund Scheme (TRS) regulations); Payroll taxes (State taxes); Aircraft noise levies; Environmental Management Charge (a charge for activities on the Great Barrier Reef Marine Park area). We have focused on select key taxes that have a significant impact on the tourism industry across Australia. 3.3 Passenger Movement Charge (PMC) The Passenger Movement Charge (PMC) is a Commonwealth tax introduced in the 1995 budget levied on passengers departing Australia, replacing the departure tax. The Labor Government initially introduced the tax to recoup the full accrual costs of Customs, Immigration and Quarantine (CIQ) processing for international passengers and the cost of issuing short-stay visitor visas. However, collection from the PMC now exceeds these costs, and it is the amount of over-collection that represents an unjustified tax. The PMC is currently levied at $55 per passenger departing Australia. The charge has had a consistent history of increases since its inception: $27-1 January 1995 $30-1 January 1999 (to cover additional marketing costs in the lead-up to the 2000 Olympics) Page 19

22 $38-1 July 2001 (to cover costs of quarantine services associated with foot and mouth disease) $47-1 July 2008 (no specific rationale, but possibly to cover increased aviation security initiatives) $55-1 July 2012 (no specific rationale, although 10 per cent of the additional revenue collection will be hypothecated to supporting the Asia Marketing Fund, to promote Australia to growing Asian markets and an additional component will be allocated to boosting regional accommodation infrastructure). The most recent increase in the PMC is expected to increase revenue by $610 million over the forward estimates period. Following tourism industry representations, the proposal to automatically index the PMC on an annual basis did not proceed. Narrow-based taxes such as the PMC can particularly impact key tourism services, with production and consumption being highly mobile and subject to consumer preference. A significant part of tourism is dependent on a price-sensitive market and additional costs imposed on tourists have a pronounced impact on the competitiveness of Australian tourism in the global marketplace. Page 20

23 The NTA and its members: Advocate the need for an immediate Productivity Commission Review of the PMC. The Government should urgently remedy the over-collection of the PMC, which is a significant impediment to the Australian tourism industry. 3.4 Carbon Tax The Clean Energy Future legislative package marked the commencement of the carbon tax in Australia on 1 July While the Federal Government has made a commitment to a range of assistance packages for industry, many businesses have been excluded, particularly small and medium enterprises (SMEs), which is the constituency of many Australian tourism operators. The Australian tourism industry spans the entire Australian continent. It has an important presence in cities, towns and regions delivering economic and social benefits. To a large extent, the success of the tourism industry relies on a network of many small providers; over 55,000 tourism businesses employ less than 20 people. These providers operate on small margins and have little in the way of shielding from the adverse effects of an increased cost-base. Inevitably, the carbon tax will raise operating costs which will, in turn, be passed on to visitors through higher prices. The carbon tax will also affect the costs of transportation in Australia. While international air travel is exempt from the carbon tax, domestic air travel is not. Together with the strain of high-exchange rates, a relatively high cost of labour and an uncertain global economic environment, additional cost burdens such as the carbon tax have the potential to significantly undermine Australia's competitiveness in tourism. Page 21

24 3.5 GST and Associated Regulations (including TRS regulations) The GST is the major tax that impacts the tourism industry. In addition to constituting the greatest proportion of the tourism industry's total tax burden, the application of GST on goods is a key issue for the tourism industry given the significance of shopping as a visitor s activity and GST refunds through the Tourist Refund Scheme (TRS). Goods exports, on the basis of their contribution to the Australian economy, are GST free and in many cases receive direct support via Government programs and concessions on taxes/charges. Tourism exports are not GST free and are therefore in an uncompetitive position when compared to other classes of export. 3.6 Tourist Refund Scheme (TRS) The TRS in Australia aims to mitigate the impact of the GST on Australia's price competitiveness as a tourist destination. Generally, under the TRS, international visitors are eligible to recoup the GST amount included in the price of goods purchased within 30 days prior to departing Australia, where those goods are exported. The TRS is currently limited to goods with a value of over $300 from a single outlet. By way of comparison, France has a TRS threshold of 175 Euro per day (equivalent to around AUD$200) and Taiwan applies a threshold of NT$3,000 per day (equivalent to around AUD$100), thus reducing the cost of travelling to those countries and inducing greater visitor spending. It is important to ensure that the promotion of the TRS is effective, and that the Government and marketing bodies understand how important this benefit is to visitors in Australia. 3.7 Payroll Taxes (State) Payroll taxes are levied on the annual payroll of employers according to regulations which vary by State and Territory. Tourism is a business driven primarily by service and hospitality, and as such is highly labour intensive. In particular, a number of significant tourism sectors including accommodation, cafes and restaurants are susceptible to regulatory burdens associated with the labour market. Businesses within these Page 22

25 sectors generally reach the exemption thresholds more quickly, relative to business turnover. The particular reliance on payroll tax for State revenue distorts economic activity away from labour-intensive service industries to non-service industries, which already receive considerable Government support through tax incentives, exemptions and expenditures. Payroll taxes also impose administrative burdens on business operators; particularly labour intensive SMEs that have payroll over the exemption thresholds. Furthermore, businesses with operations located in different States and Territories are faced with further unnecessary compliance costs as a result of the different rates and exemptions thresholds prescribed by different States and Territories. Higher exemption thresholds would assist labour-intensive sectors such as tourism and hospitality to be more competitive. 3.8 Cost Recovery Fees/Charges/Regulations Affecting Tourism Various charges and fees (some of a cost recovery nature) also affect Australia's tourism industry. These include but are not limited to: Visa Fees; Partial cost recovery of community policing at international airports; 3.9 Visa Fees Any person not holding an Australian passport must arrive in Australia on a visa. There are different types of visas (with different corresponding fees) that tourists can apply for. Visitors from many high-yield markets such as India and China (not on the Electronic Travel Authority (ETA) eligible countries list) generally arrive on a tourist visa - subclass 676. Applying for such a visa can be complex and costly. Each applicant must pay a $115 non-refundable charge, which, in the cases of Indian and Chinese visitors who often visit in family groups, adds a significant financial barrier to visiting Australia. For visitors from eligible countries on the ETA list, a $20 processing fee is still payable. It is of interest that many countries in the region (for example, Singapore and Hong Kong) that compete for Asia-Pacific visitor spend do not impose such a fee for visitors from eligible countries. Page 23

26 The tourism industry is concerned that visa fees should be set at levels that represent a cost-recovery fee only, and that do not result in an overcollection compared with processing costs. The NTA advocates that visa fees should not exceed the cost of providing essential border protection and immigration services to international visitors and Australian residents. Visa fees (or portions of visa fee revenue) that are levied for the purpose of general revenue collections constitute an unreasonable tax on tourism Partial Cost Recovery of Community Policing at International Airports The Budget announced the Government's intention to recover costs associated with Australian Federal Policy (AFP) community policing at Australia's 10 Designated Airports. The measure is forecast to collect $118 million over the forward estimates, which will account for approximately 70 per cent of total relevant AFP costs. The preferred option for collecting this revenue appears to currently be an option based upon passenger movements. The Board of Airline Representatives of Australia (BARA) has written to the Attorney-General's Department to advise that: It supports distribution of community policing costs between designated airport operators on the basis of passenger movements; However, this support does not signal 'any acceptance by BARA of airline passengers meeting the costs of community policing via airline charges or the PMC or a 'PMC-like' charge or Government mandated security charges'. In this light, the NTA seeks amendments to the Australian Government s Cost Recovery Guidelines. The Guidelines should be amended to ensure full transparency for industry, and to provide greater clarity surrounding the circumstances in which cost recovery fees and charges are justified. This is particularly pertinent in areas such as aviation security, where Governments have funded services in an ongoing manner through general tax revenues for many years. Page 24

27 The NTA and its members: Strongly oppose any cost recovery measure that covers services generally provided by Government that are also funded as essential services out of consolidated revenue. Industry submits that there needs to be a compelling case, backed by strong evidence, that a cost recovery measure is effectively hypothecating revenues collected for the services that justify the additional fee. Seek amendments to the Australian Government s Cost Recovery Guidelines Other Barriers to Investment Tourism Research Australia's State of the Industry Report 2012 identified that current levels of investment will not be sufficient to reach the T2020 targets for accommodation. The Government-commissioned LEK Report of June 2011 identified several reasons why Australia's tourism industry suffers from a lack of investment in new short term accommodation supply as well as limited refurbishment of existing stock. Amongst many reasons, they identify that the investment case for hotels in metro areas is challenged as land is scarce and residential and commercial properties offer higher returns. Residential properties built under the Class 2 provisions of the Building Code are also able to enter the short term accommodation market with lower build requirements, and are subject to different tax treatments. Construction costs for hotels are therefore significantly higher than serviced apartments. Of the 5 recommendations laid out by LEK as a means of overcoming the barriers, the NTA strongly support two in particular: A 50 per cent capital works deduction bonus, with the remaining 50 per cent spread over 12.5 years at 4 per cent to stimulate investment in new developments as well as refurbishments for short term accommodation operators. Reforms to the Building Code where tourist developments are disadvantaged: Page 25

28 o An independent review of the accessibility standards under Class 2 and Class 3 for new buildings. The industry understands the Government is currently tendering for a study into the supply of and demand for accessible accommodation, which will inform the scheduled review of the BCA Standards. o Once the accessible room standards are reviewed, new apartments that are to be used for short term accommodation and hotels should be treated consistently in respect of building requirements. These initiatives are expected to result in an increase in accommodation stock to address the current shortages (full details of the proposals are in the LEK Consulting Report, June 2011). Of the five recommendations laid out by LEK as a means of overcoming barriers, the NTA members strongly support: o A 50 per cent capital works deduction bonus, with the remaining 50 per cent spread over 12.5 years at 4 per cent to stimulate investment in new developments as well as refurbishments for short term accommodation operators. o Reforms to the Building Code where tourist developments are disadvantaged: o An independent review of the accessibility standards under Class 2 and Class 3 for new buildings. The industry understands the Government is currently tendering for a study into the supply of and demand for accessible accommodation, which will inform the scheduled review of the BCA Standards. o Once the accessible room standards are reviewed, new apartments that are to be used for short term accommodation and hotels should be treated consistently in respect of building requirements. 4. Attract, Develop and Retain the Right Number of People with the Right Skills in Tourism, Hospitality and Events The tourism and hospitality industry provides great socio-economic benefit to the Australian community as one of its largest employers and as a significant contributor to the GDP. Tourism's contribution to the Australian Page 26

29 economy is only set to increase, with tourism consumption forecast to grow at an average annual rate of 1.8 per cent per annum. In the ABS National Accounts for the September 2012 quarter, 'Accommodation and Food Services' was the standout, rising by 0.5 per cent. The tourism industry has been affected by labour and skills shortages over the past decade. Current labour and skills shortages limit the productive capacity of Australian tourism, hampering efforts to compete successfully with overseas destinations. Through the Australian Tourism Labour Force Report, the Labour and Skills Working Group of the National Long Term Tourism Strategy has established considerable evidence demonstrating the labour market shortages in the supply of skilled staff. Tourism at this time faces significant employment vacancies, equivalent to some 38,500 jobs throughout Australia. Without action, this is forecast to increase to a shortage of 56,000 workers in tourism by The labour shortage in hospitality is forecast to increase by 80,000 workers in this period. Nearly half of all tourism businesses surveyed indicated they are experiencing recruitment, retention or skills deficiencies, or some combination of the three. Tourism has a high turnover rate, reflecting the transitory nature of large parts of the tourism labour force. Retention of labour remains a significant challenge for tourism operators. The Federal Government needs to change the current policy settings that have restricted the tourism and hospitality industry's access to a variety of skilled staff and different levels. Changes to the skilled migration framework, the move to fund training for higher skilled qualifications, and a growing focus on more 'high-value' industries has significantly reduced the supply of labour from traditional sources. It is imperative that these restrictions on the sources of labour are removed and that the Government appropriately recognises and funds skills at all levels, and removes this capacity constraint. The Australian immigration system and the domestic training systems are both calibrated to the same kinds of occupations and skills at a high level, which means that there is an increasing shortage in the availability of unskilled or lower skilled employees. Page 27

30 The NTA members strongly urge that the Government adopts policy settings which: Ensure that gaps in domestic skills and labour are met; Ensure that tourism and hospitality are included in future skills, training and labour market programs; Provide tourism and hospitality operators with greater access to temporary/skilled workers; Establish an effective system of workplace regulation that recognises the 24/7 nature of tourism and hospitality, particularly the predominance of small and regional based businesses. 4.1 Long Term Skills and Career Development It is essential that the tourism and hospitality industry is supported by an adequately skilled labour force. Given that less than 50 per cent of the current labour force has post school qualifications, the industry faces significant challenges in up-skilling existing staff. The Federal Government invests significantly in skills and training, and it is critical that tourism and hospitality be included in these programs. The tourism and hospitality workforce make a significant contribution to the skills and productivity of the Australian workforce. In addition to attractive long term career options, tourism also offers low skilled and temporary jobs, which assists with workforce participation and flexibility. The institutional arrangements should support all types of employment, from low skilled and/or temporary, to the more highly trained roles in tourism and hospitality. In recent years, this challenge to increase the skills levels of tourism and hospitality employees has been compounded by the focus of the Federal Government on funding training in perceived 'higher value' industries. In such industries the cost of training is borne by Government. For the tourism and hospitality industries, given the withdrawal of incentives and the reality that the cost of Certificate II's are not being met by most State and Territory Governments, the cost of providing training and up-skilling their workforce Page 28