Terrie's Take 978 (Tourism Edition) - Japan's Departure Tax - The Perfect, Stealth Grab for Half a Billion Dollars

Terrie's Take terrie at mailman.japaninc.com
Mon Feb 4 19:50:28 JST 2019

* * * * * * * * TERRIE'S (TOURISM) TAKE - BY TERRIE LLOYD * * * * * *
A bi-weekly focused look at the tourism sector in Japan, by Terrie Lloyd, a
long-term technology and media entrepreneur living in Japan. (

Tourism Sector Edition Sunday, Feb 03, 2019, Issue No. 978

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+++ Japan's Departure Tax - The Perfect, Stealth Grab for Half a Billion

>From Monday January 7th, Japan introduced its first new tax in 28 years
(the last one being a land value tax in 1992), which is a traveler
departure tax of JPY1,000 per passenger aged two or older and who is not in
the armed forces, government, or other exempt category. The new tax will
apply to about 50m people annually, being approximately 17m Japanese
heading overseas for business and pleasure, oh, and of course not
forgetting the 32m (estimated) foreigners who will be traveling to Japan
this year. As far as taxes go, this one has attracted very little criticism
or commentary, probably because for the average voting Japanese, overseas
trips are synonymous with luxury lifestyles and so who could complain about
an extra thousand yen tagged on to a trip that will probably cost hundreds
of thousands more?

There is also the fact that many other developed countries already charge
departure taxes, including Australia, whose Passenger Movement Charge (PMC)
of AU$55 is one of the highest in the world, and the UK's Air Passenger
Duty (APD), which is probably the second highest, coming in at 13 pounds
per economy class passenger and 26 pounds for other classes. Both Australia
and the UK introduced their taxes nominally to "improve" customs and
immigration processing for visiting tourists, but as personal experience
will vouch, it is really just another way of scalping tourists who are not
in a position to fight back politically (although they can stay away - more
below on this). So it seems that Japan is simply borrowing international
precedents to establish its own little tax pin prick, and it's likely that
just as with the other two destinations mentioned, the tax will continue to
tick upwards from here. Indeed, in the UK, the original traveler tax
started out at 5 pounds and is now almost triple that.

The most disturbing thing about Japan's new travel tax, though, is the
extraordinary opaqueness of what the tax will be used for. Estimates are
that the new tax will net about JPY50bn in new income for the government,
and the powers that be have mumbled that they will apply that cash for
"smoother travel services, improving information services, and facial
recognition gates at air and seaports". OK... so are we saying that we need
about US$500 million PER year for electronic gates, free WiFi, and
electronic payment systems? I've used the "automatic" immigration gates
that are already there - and as a registered user I can tell you that they
are almost useless. They do nothing other than automate the taking of photo
and finger prints, after which you still have to talk to an bored official
who then re-checks your paperwork. Indeed, for the paper-obsessed Japanese,
it is hard to imagine the bureaucracy trusting AI and facial recognition to
process a foreigner leaving the country.

[Continued below...]

---------- Japan Rugby Accommodation Challenges? ----------

If you're like us, you probably left it to the last minute to get your
Rugby World Cup tickets. And now you have them, your next challenge is
going to be finding somewhere to stay both for the games, and in between as
well. Yep, because in its efforts to spread the goodwill around, the
Japanese rugby folks assigned the preliminary round matches to some very,
very small towns, all around the country. As other ticket holders are now
discovering, finding somewhere to kip down is hard.

That's where Japan Travel comes in. We're one of Japan's few foreign-owned
Type-2 licensed travel agencies, and our specialty is finding solutions to
your problems. Need somewhere to stay near Oita or Kamaishi? Why not avoid
the crowd and simply rent a car-and-support package through us, allowing
you to pick any one of a number of other towns in the area to stay in. Or,
if you want to be close to the action, what about renting a motor home or
even a tent, and having local food catered in?! We can offer you a
multitude of options and make your stay in Japan a memorable one. Just tell
us your challenge and your budget range.

For rugby travel assistance, contact us at: tours at japantravel.com. Or visit
our pages at: http://japantravel.co.jp/en/about/travel-agency/
[...Article continues]

The reality is that this is a tax on people who can't complain about it
because 70% of them are not citizens or tax payers, and those who are, well
they are in the minority being rich enough to travel overseas - so they're
likely to want to stay quiet. This has meant that the politicians have made
no effort at all to justify the tax grab. Hmmm, so just where is the money
really going? It seems that each new media report has a different shopping
list. Some are talking about town infrastructure, like the WiFi I mentioned
previously, while others seem to be talking about IT systems and further
encroachment by government on business services that ideally should stay in
the private sector. When I'm out in the regions, I'm hearing murmurs of a
desire for local tourism entities to tap in to those funds for marketing
and websites. And no doubt there will also be some for NPOs that support
volunteer guides and translators.

Oh, and what about more electronic notice boards and surveillance cameras?
You can never have too many of those - especially when Japanese electronics
manufacturers can't find anyone else to buy their overpriced stuff
anyway... With JPY50bn every year - or perhaps  JPY100bn by the time the
government has jacked up the fees several times - it seems to me that there
is going to be a big chunk left over with no one to claim it. That means
we're in for some serious partying and overpriced projects by the old boys
in the tourism sector and very little of practical use to tourists
themselves. So what else is new? Petrol taxes and motorway tolls around the
country have long exceeded the cost of running the country's
infrastructure, and yet no one seems to care enough about it to create a
fuss. Instead, people have slowly just stopped using cars, and the
amakudari guys have gotten fat on entertainment expenses.

Which leads us to the second big question - whether departure taxes are a
risk-free revenue source or whether they will actually damage the inbound
travel business? A study done last October (2018) by the Austrian Institute
of Economic Research and the University of Iceland found that after Germany
and Austria introduced a departure tax in 2011, the number of passengers
fell by 9% in the year of introduction and 5% a year thereafter. Most
affected were the Low Cost Carrier (LCC) airlines and the airports that
served them. Likewise, a separate study also done in 2018 found that a
Norwegian departure tax of NOK80 introduced in 2016 caused the Irish LCC
Ryanair to stop using a local airport in Oslo, Rygge, and because of the
loss of business the airport subsequently had to close to civil aviation
operations...! Talk about cutting off your nose to spite your face. I can
think of a number of secondary airports in Japan that might suffer a
similar fate - such as the Ibaraki airport, currently a base for China's
Spring Airlines. Likewise Takamatsu, Matsuyama, Kumamoto, and probably 20

Separately the International Air Transport Association (IATA) has
calculated that if Australia abolished its PMC fees, tourism would increase
by around AU$1.7bn, almost 6 times more than the current AU$485m the tax
brings in. It would be interesting if IATA did a similar study for Japan.

http://bit.ly/2RztuDz [Study on German, Austrian travel fall-off after
Departure Tax was introduced.]

...The information janitors/

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Written by: Terrie Lloyd (terrie.lloyd at japaninc.com)

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