This levy will be imposed on all air travellers leaving the country from June 1 next year.

Maybank Kim Eng analyst Mohsin Aziz voiced his support for the levy as he was of the view that the industry needed the money for future investment and sustainability.

“So the caveat here is, whatever money collected needs to be re-spent on the industry and make it better for the future,” he said after speaking at an aviation forum at Universiti Kebangsaan Malaysia here today.

Malaysia’s air transport infrastructure is currently ranked as 21st best in the world and the levy could be utilised to improve facilities and boost the ranking further, he said.

During the tabling of Budget 2019, Putrajaya had proposed a departure levy on all air travellers leaving the country from June 1, 2019, to encourage the development of domestic tourism.

The departure tax of RM20 and RM40 would be on top of the RM73 passenger service charge (PSC) already imposed by airports.

Mohsin also said the government should provide some concession to children and exempt them from paying the levy.

“It is a good gesture that will develop goodwill from the rakyat to the government.

“The levy itself may not be all that much, but if you are a family travelling with many children, it does add up.

“If the government can exclude the children from paying the departure levy, it will be very well appreciated by the rakyat.”

Why new tax is needed

When asked on why a new tax was needed and why the government did not take a portion from the PSC, Mohsin said the current tax structure was insufficient to cover the entire expenses of the aviation industry.

“The aviation industry spends RM1.2 billion every year. On top of that, there is a capex (capital expenditure) requirement of RM1.8 billion to upgrade equipment and infrastructure.

“So they need more revenue streams to sustainably upgrade the equipment, the system and hire more people.

“Hiring more people is the issue right now. All the agencies, such as immigration and the civil aviation authority, complain about not having enough manpower. That is a problem.

“But if there are more revenue streams, the ability to hire, train and upgrade the skills of people will be easier.”

Mohsin proposed a gradual increase in the levy, saying that it should be spread over two occasions, “maybe RM10 and RM20 during the first round, and after six months or a year, raise it to RM20 and RM40, which is the intended figure.

“Then, it will not be too big of a shock. Make it gradual.”

Experts had cautioned that the departure levy would affect tourism arrivals as it would lead to a drop in the number of passengers.

However, Mohsin said this would not be the case, using the examples of Hong Kong and Singapore.

The analyst, in his presentation, said Hong Kong had, in 2016, introduced an airport development fee, which raised airport charges, leading to 40% more tax.

“Traffic growth was still okay. It was lower than before, but it was still in positive territory.”

He said the same was noted when the Changi Airport raised its airport tax by 45% on July 1.

“We would think that higher charges would mean a greater burden and people will not travel. But somehow the experiences of Hong Kong and Singapore say otherwise. People will still carry on as normal,” he said.

Tax only the rich

Meanwhile, another speaker, DAP Socialist Youth’s national vice-chief Muhammad Shakir Ameer Mohideen proposed that the government only impose the departure levy on rich travellers who opt for premium flights and services.

He said those who chose to travel on luxury cruise ships, as well as private jets, should also be subjected to the levy, “as people pay premium prices for cruise ships”.

“If you are willing to pay extra for comfort, I believe the departure levy should not be an issue.

“If you want something extra, you pay for it. If you want something comfortable, say with Malaysia Airlines, Singapore Airlines or Etihad Airways, you pay extra for it.

“For those who take low-cost flights, I am of the view that the departure levy should not be imposed on them. Maybe the government can consider charging the levy on passengers who take premium flights.

“I’m sure there are many tycoons who own private jets when they go abroad. Since the government is already firm in imposing the departure tax, maybe we can start with the premium ones first,” he added.