The Turnbull government now looks like it's picked another fight with the tourism industry

Photo: Graham Denholm/Getty Images

The boss of Australia’s tourism peak body, Margy Osmond, has called plans by the Turnbull government to increase the Passenger Movement Charge (PMC) at airports to $60 from July next year as a $1 billion “cash grab” to offset a back down on on its proposed backpacker tax.

Osmond, CEO of the Tourism & Transport Forum Australia, appeared before the Senate economics legislation committee, which is looking at the issue of the backpacker tax and PMC as it considers whether to back the government’s plan.

Former treasurer Joe Hockey announced the tax in the 2015 Budget, which planned to tax foreigners on a working holiday visa 32.5% on every dollar they earn, scrapping the previous $18,400 tax-free threshold.

But the move was widely condemned by the tourism and agriculture sectors, with industry body AUSVEG calling it “short-sighted”. Under pressure from Nationals, the government announced in March that it would review the tax and last month treasurer Scott Morrison announced he would cut the tax rate for working holidaymakers from 32.5% to 19% on earnings up to $37,000 pa, from January 1, 2017.

But insisting that the change should “wash its own face” in terms of Budget impact, Morrison announced a $5 increase in the PMC to $60 to offset the loss of revenue.

Margy Osmond. Photo: supplied

Osmond argued there was no economic justification for an increase what she calls the government’s “holiday tax.”

“The Government wants this tax package to ‘wash its face’, and that’s fine, but it doesn’t have to take the travelling public to the cleaner,” she said.

In her opening statement to the senate, Osmond said that as her organisation lobbied to change the backpacker tax, there was no mention of an increase to the passenger movement charge.

“So its inclusion as part of the backpacker tax package came as quite a shock to the industry and I would argue has undermined the consultation process by which industry engaged in good faith,” she said.

“TTF does not accept that the holiday tax hike must be considered lock-step with the backpacker tax package.”

“The backpacker tax has been a mess of the Government’s own making. The government should never have included an increase to the passenger movement charge in the reform package it announced last month.”

Osmond said the increase charge will impact on 9.7 million Australians and 8 million international visitors departing the country, adding that analysis her organisation commissioned from KMPG showed that increasing the tax was not necessary to meet the $540 million revenue target the government set itself with the backpacker tax.

“The passenger movement charge is a $1 billion tax on travel. It was introduced as a cost-recovery charge for passenger facilitation services (customs, border security) at our international gateways. The cost of providing those services is estimated to be around $250 million. Meaning that the Federal Government is profiting to the tune of $750 million a year. That alone should be reason enough for the cash grab to be knocked back by the Senate,” she said.

Osmond said the tourism industry was price sensitive.

“The federal government is very keen to dismiss this as just a $5 increase or ‘a cup of coffee’. No, it will now be a $60 tax on travel. That is $240 for a family of four (over the age of 12). But when you add that to other travel costs such as the $135 visa charge for a Chinese visitor – visa fees plus the PMC brings the total cost of travel to Australia to nearly $200 per person,” she said.

NOW WATCH: Briefing videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.