Chapter 2


Chapter 2

Background and overview of the Bill

Key provisions of the Bill

2.1        Schedule 1 of the Bill contains two items:

  • item 1 amends section 6 of the PMC Act to increase the rate of the PMC from $47 to $55 with effect from 1 July 2012, and introduces annual indexation of the PMC in accordance with CPI from 1 July 2013; and
  • item 2 provides that the increased charge will apply to the departure of a person from Australia on or after 1 July 2012, unless that person departs on a ticket sold or issued prior to that date.

Background

2.2        The PMC was introduced in 1995 to replace departure tax. The PMC, which is administered by the Australian Customs and Border Protection Service (Customs and Border Protection) is levied under the PMC Act and collected under the Passenger Movement Charge Collection Act 1978.[1]

2.3        A departure tax preceded the PMC and was introduced by the Departure Tax Act 1978. Details of the departure tax were first announced in the 1978 budget speech by the Treasurer, with legislation later introduced by the Minister for Immigration and Ethnic Affairs.[2] The minister outlined the reasons for introducing the departure tax:

In the present tight budgetary situation it has been necessary for the Government to consider avenues for raising additional revenue. The tax on departures will make a useful contribution in this regard. Many countries have taxes similar to the departure tax proposed for Australia. Overseas visitors to this country, and many Australians travelling abroad, will have had experience with payments of this kind.[3]

2.4        Since its introduction, departure tax has been used as a cost recovery measure to recoup the notional cost of customs, immigration and quarantine processing of passengers entering and leaving Australia, as well as the cost of issuing short-term visas.

2.5        Over time, however, departure tax has moved from being used as a cost recovery measure to becoming, at least in part, a general revenue raising measure. In 2000, the Australian National Audit Office (ANAO) noted:

The PMC is levied under Commonwealth taxing powers and is now applied partly as a general revenue raising source. As a consequence, the PMC is no longer solely linked to cost recovery of Customs, Immigration and Quarantine services.[4]

2.6        The ANAO further noted that, in law, the PMC is a tax.[5]

Rate changes to the departure tax/passenger movement charge

2.7        The charge on passenger movements was introduced under the Departure Tax Act 1978 as a departure tax. In 1995 the name of the tax was changed to the passenger movement charge and the legislation was also changed to the Passenger Movement Charge Act 1978.

2.8        Since the introduction of the charge on passenger movements, the rate has been adjusted eight times. The table below sets out the history of the changes to the rate of departure tax/PMC:

Table 2.1: History of changes to the departure tax/passenger movement charge (PMC)

Title of charge

Date commenced

Rate

Relevant legislation

Departure tax

24 October 1978

$10

Departure Tax Act 1978

Departure tax

1 October 1981

$20

Departure Tax Amendment Act 1981

Departure tax

1 July 1988

$10

Departure Tax Amendment Act 1988

Departure tax

1 August 1991

$20

Departure Tax Amendment Act 1991

Departure tax

1 January 1994

$25

Departure Tax Amendment Act 1993

PMC

1 January 1995

$27

Departure Tax Amendment Act 1994

PMC

1 January 1999

$30

PMC Amendment Act 1998

PMC

1 July 2001

$38

PMC Amendment Act 2001

PMC

1 July 2008

$47

PMC Amendment Act 2008

PMC

1 July 2012 (proposed)

$55

PMC Amendment Bill 2012

2.9        The rate of the PMC has been increased with each amendment to the legislation, save for changes in 1988 when the tax decreased from $20 to $10. The table below outlines the reasons for changing the rate of the departure tax/PMC:

Table 2.2: Reasons for changes to the departure tax/passenger movement charge

Rate change

Rate

Reason for change

24 October 1978

$10

To recover the costs of customs, immigration and quarantine operations at Australia's ports and airports.

1 October 1981

$20

The second reading speech noted only that the departure tax had not been varied since 1978 when it was introduced.

1 July 1988

$10

To reflect a new government model of cost recovery for the aviation industry.

1 August 1991

$20

To fund the promotion of Australia as a tourist destination.

1 January 1994

$25

To increase funding for promoting Australian tourism.

1 January 1995

$27

To achieve full cost recovery for customs, immigration and quarantine processing at Australia's borders and the cost of issuing of short-term visitor visas.

1 January 1999

$30

To help meet the additional costs associated with hosting the Olympic Games in 2000.

1 July 2001

$38

To cover the increased cost of inspecting passengers, mail and cargo to Australia as a result of increased quarantine intervention dealing with foot and mouth disease.

1 July 2008

$47

To partially offset the costs of national aviation security initiatives.

1 July 2012 (proposed)

$55

To fund the establishment of the Asia Marketing Fund.

Source: Ministers' second reading speeches, 1978-2012

Collection arrangements

2.10      The PMC is levied on departures from Australia on commercial and charter airlines and passenger ships. The PMC is collected under section 10 of the Passenger Movement Charge Collection Act 1978. Customs and Border Protection administers these arrangements.

2.11      The PMC remittance arrangements require the PMC to be levied at the time a ticket is sold to a passenger and then remitted to Customs and Border Protection by the airline or shipping companies within an agreed timeframe.[6]

2.12      Most carriers have a PMC remittance arrangement with Customs and Border Protection and this process negates the need for passengers to pay the PMC separately before departure. However, the PMC from passengers departing on small itinerant flights (such as private planes) and sea craft is collected by Customs and Border Protection directly from the passenger, captain or agent at the point of departure.[7]

2.13      Provisions are made for the refund of the PMC in certain circumstances, such as the departure not taking place, the person returning to Australia without entering another country, or the charge being incorrectly applied.[8] In these circumstances, the airline or shipping company is required to provide a full refund. In the case that the remittance has already been paid by the airline or shipping company to Customs and Border Protection, Customs and Border Protection will reimburse the money to the transport company or directly to the passenger.

Revenue raised by the passenger movement charge

2.14      The following table shows the rate of the PMC, the revenue raised by the PMC, and the number of international departures (air and sea) from 2005–06 to 
2010–11. The table also includes the projected budget estimates for 2012–13 to
2015–16, taking into account the proposed rise of the PMC to $55 and its annual indexation with CPI.

Table 2.3: Revenue raised from passenger movement charge (PMC) and the number of international departures, 2005–06 to 2015–16

Financial year

Rate of PMC

PMC revenue (millions)

Number of international departures (air and sea) (millions)

2005–06

$38

$374.6

10.7

2006–07

$38

$393.2

11.2

2007–08

$38

$420.0

11.8

2008–09

$47

$502.8

12.0

2009–10

$47

$571.3

13.1

2010–11

$47

$615.5

14.1

2011–12

$47

$655.5 (projected)

14.9 (projected)

2012–13

$55 (proposed)

$793.8 (projected)

16.1 (projected)

2013–14

$5 +CPI (proposed)

$884.0 (projected)

16.9 (projected)

2014–15

$55+CPI (proposed)

$961.1 (projected)

17.9 (projected)

2015–16

$55+CPI (proposed)

$1 036.7 (projected)

18.8 (projected)

Source: Australian Customs and Border Security Service, Annual Reports 2005–06, 2007–08, 2008‑09, 2009–10, 2010–11; Australian Customs and Border Protection Service, Portfolio Budget Statement 2012–13, pp 113 and 127.

Reasons for proposed changes

2.15      The increase to the PMC proposed in the Bill was first announced as part of the Commonwealth government's 2012–13 Budget.[9] The increase to the PMC is intended to fund the establishment of the Asia Marking Fund, which will promote Australia to growing tourism markets in Asia. At the time of introducing the legislation, the Minister stated:

Sixty-one million dollars will be allocated to the fund, which is aimed at supporting the promotion of Australia to growing markets in Asia as a premium holiday and business travel destination.

It is estimated that, in less than a decade, there will be 100 million outbound travellers per annum from China alone. This fund will help promote Australia as a touring and business destination in this important market.[10]

2.16      The government also intends for the annual indexation of the PMC with CPI to 'provide certainty to the tourism industry about future increases'.[11]

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