Skift Take
No destination gets away uncriticized for imposing a tax on tourists. Japan is no exception, especially since the destination is loved by millions of tourists and it isn’t clear-cut why they are being taxed. But it's unlikely tourists will say sayonara to Japan, say operators.
Japan went ahead and implemented a departure tax of $9 (¥1,000) on Monday despite the International Air Transport Association strongly opposing the move last year when the planned levy was announced.
“We are disappointed that the Japanese government decided to proceed with the tourism tax which took effect this month,” the association’s spokesperson Albert Tjoeng told Skift.
Departure taxes are not new, but increasingly more governments seem to want to impose them on tourists, or to hike existing fees. Malaysia, for example, is also considering imposing a levy on all outbound air passengers starting June 1.
Bodies such as the International Air Transport Association, the global trade group for aviation, are up-in-arms over the principles of such a tax and how it benefits the industry.
“We recognize that legislation [in Japan] was also passed to limit the use of the levy to boost tourism,” said Tjoeng. “In this respect, we urge the Japanese government to take steps to ensure that the revenue from the departure tax is reinvested in the aviation industry, specifically aviation security and passenger experience and facilitation.”
The National Tax Agency’s explanation on how the levy would be used is simplistic and generic, and indicates that allocations will go more towards infrastructure enhancement than promotion.
It also reflects that any usage of the funds to boost tourism will only be indirect.
Revenues would be allocated to the following three areas, said the agency: “Create a more comfortable, stress-free tourism; improve access to information about a wide variety of attractions of Japan; develop tourist resources, taking advantage of the unique cultural and natural assets of respective regions.”
The country is preparing for the Tokyo Olympics and Paralympics next year, and has set a target of 40 million arrivals for the year.
However, the hosting also fuels a view among some that Japan needs those revenues to fund the infrastructure and operations for the games, especially when reports surfaced that it would face a hefty bill to host the events.
Based on the government’s board of audit report released last October, obtained by the Associated Press, the price tag is expected to be at least $25 billion — nearly four times Japan’s original 2013 estimate.
On top of that, the country was hit by natural disasters last year, with arrivals falling 5.3 percent in September 2018 — its first decline in visitor numbers in six years — although this rebounded with a 1.8 percent increase in October, latest available data from Japan National Tourism Organization shows.
The government estimates that the tax, dubbed ‘sayonara’ (goodbye) by many, will bring some $459 million worth of revenue in fiscal year 2019.
It is levied per departure on passengers leaving Japan by air or sea, except those on transit (leaving Japan within 24 hours of arrival) and children under the age of two years.
The tax is added to air fares and cruise fares. Operationally, it seems smooth-sailing thus far.
“Genting Cruise Lines has been aware of the planned departure tax since the latter part of 2018 and has factored this into the port passengers for all Japan itineraries. We do not anticipate that the collection of this new tax will create any issues for our cruise brands,” said Thatcher Brown, president of Dream Cruises and managing director of Crystal Cruises Asia.
Air travel ‘highly sensitive’ to price change
It may seem small to quibble about $9, but the International Air Transport Association said that “air transport, and in particular international air travel, is highly sensitive to changes in price”.
“Imposing a new discriminatory tax on air passengers will undoubtedly have a negative impact on passenger demand, which, in turn, will have negative consequences for the economy of Japan, said Vinoop Goel, the association’s regional director of member and external relations, airport, passenger, cargo and security, in a position paper presented to Japan last year.
He gave two examples of taxes withdrawing due to their negative economic impacts — the Irish Air Transport Tax and the Netherlands Air Passenger Departure Tax.
Implementing this tax will very likely have a negative impact on the growth in tourist volumes, which is predicted to attract 40 million visitors by 2020 to Japan and 60 million by 2030, he said.
Moreover, air passenger traffic growth in Asia-Pacific is predicted to outpace that of both Europe and North America up to at least 2034, rising to a total of 4.3 billion passengers, and Japan must ensure its aviation remains competitive to benefit from this forecasted growth, Goel pointed out.
He added, “At an absolute minimum, the tourism tax should not be imposed on those persons that are directly involved in supporting and enabling tourism. Airlines should not be burdened by additional costs, as they are one of the largest contributors to a country’s tourism development.”
But tour operators sending big numbers to Japan do not think the tax will affect their volumes.
“So far, we know it is only [$9] per passenger, so not material. We do not believe it will have an impact on our volumes to Japan,” said Alessandro Dassi, managing director of Thomas Cook China.
Likewise, Chan Brothers Singapore’s director of corporate planning, Ivy Tan, said Japan “has been surging since 2013” and it’s unlikely the tax would deter Singaporeans from traveling to the country.
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Photo credit: Japan says revenue from the tax will go towards infrastructure improvements. 278379