Will Malaysia halt the departure tax launch?

SINGAPORE, 22 August 2019: Travellers will pay more to holiday in Malaysia when the country introduces a new departure tax on all airline travellers effective 1 September.

But there is a glimmer of hope that the latest tax burden might stumble in the run-up to the starting line.

Malaysia’s Prime Minister, Dr Mahathir bin Mohamad, promised earlier this week to review it.  Hopefully, common sense will prevail. As the country prepares to welcome Visit Malaysia 2020 inflicting yet another travel-related tax could send conflicting messages.

Often viewed as an underperformer when compared with high flying neighbours, Malaysia has an opportunity to expand lucrative markets such as long-stay and retiree travel. Thailand’s Immigration Bureau makes that possible by reviving archaic laws that require foreigners to report their every move.  Malaysia stands to benefit if it positions itself as a friendly destination for retirees, but adding a departure tax is less than helpful.  Also, it could constitute a stumbling block for the country’s Visit Year campaign in 2020.

Dr Mahathir has a few more days left to mull over the departure tax and who knows the review might lead to a postponement to after the Visit Year ends.

There are also plenty of other travel-related taxes to top up government coffers. According to an International Air Transport Association report released December 2018, Malaysia currently imposes several taxes and charges on passengers travelling by air such as the Passenger Service and Security Charge on domestic and international air transport; the Regulatory Service Charge on domestic and international air transport; and the Service Tax on domestic air transport.

Specific to international air transport, IATA points out that each departing passenger already pays MYR74 in aviation charges every time they board a plane.

However, with the introduction of the Departure Tax (due to start 1 September 2019), the total taxes and fees paid by each departing international passenger will rise to a minimum of MYR 82 for economy class passengers flying to ASEAN destinations and as much as MYR124 for other classes of travel.

When travelling beyond ASEAN the total tax damage could rise to MYR94 for economy class travellers and other classes of travel as much as MYR224.

The new is expected to rake in around MYR700 to 800 million a year according to report this week in the Borneo Post.

The rates based on the seat class and destinations are MYR8 for travel within ASEAN in economy class. Those travelling on other flight classes to ASEAN will pay MYR50.

For flights beyond ASEAN, those travelling economy class will pay MYR20. Passengers in other flight classes will pay MYR150.

Foreign tourists visiting Malaysia pay other taxes not linked to airlines and airports. One is the Tourism Tax introduced in September 2017 that debits guests MYR10 per room night.

It would improve the chances of success for the Visit Malaysia Year 2020 if some taxes were axed to emphasise the campaign’s welcome.  If not, we may remember the Visit Year for niggling taxes, not forgetting, of course, the Departure Tax the final farewell when we board the aircraft home.