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Departure tax

Japan set to bank ¥40 billion per year for tourism sector with new departure tax

by

Staff Writer

From January 2019 Japan is set to impose a ¥1,000 tax on everyone departing the country, to secure funding for tourism infrastructure and promotion amid record-breaking arrivals of international travelers.

The inbound tourism industry is one of the few growth sectors in the rapidly graying and shrinking country.

The government aims to increase the annual number of international visitors to 40 million by 2020, and 60 million by 2030. To reach the targets, it claims, the nation needs extra funds to upgrade tourism facilities.

Although the amount may not be substantial on an individual level some officials in the travel industry have voiced concerns over the levy’s possible impact on their business, saying it could put off inbound visitors — especially those who fly on budget carriers.

Here are some questions and answers about the new tax, which is expected to be introduced on Jan. 7, 2019:

Where did the idea come from?

The idea of taxing travelers as they depart the country surfaced in the summer, when it was reported that the government was considering the policy. Chief Cabinet Secretary Yoshihide Suga, who has been eager to boost tourism, is said to be the one who proposed the idea.

Following the reports, the Japan Tourism Agency convened a panel of experts in September to discuss ways to fund upgrades to tourism infrastructure.

After only two months of discussions and hearings involving related industries, the panel compiled a proposal in November advising the government to create a departure tax.

The amount should “not be more than ¥1,000” per person and it should be introduced before the 2020 Tokyo Olympics and Paralympics, the panel said.

Without much opposition, the plan secured approval from the ruling Liberal Democratic Party’s tax commission and was included in a fiscal 2018 tax reform plan released on Thursday.

Such speedy decision-making has prompted questions from experts about whether there was really enough discussion about the necessity for the new tax. Questions have also been asked about whether the government had sought ways to implement tourism measures under the existing budget.

In 2016, around 40 million people departed Japan, meaning the new tax could generate about ¥40 billion a year — nearly double the agency’s initial budget for fiscal 2017.

Who has to pay?

Both Japanese and non-Japanese departing the country will face the ¥1,000 levy, which is expected to be included in ticket prices for flights and sailings.

Children under 2 years old and transit passengers who depart Japan within 24 hours of their arrival will be exempt.

How will the revenue be spent?

Authorities say it will be used to fund tourism-related measures to create an environment more agreeable to international visitors.

Although nothing specific has been set out, some of the ideas proposed by the panel included bolstering security checks using the latest technologies, speeding up immigration procedures, installing more free Wi-Fi hot spots and increasing multilingual signs — especially in rural areas.

Referring to a survey of foreign visitors conducted by the Japan Tourism Agency conducted in 2016, which found that many struggled with communication at restaurants or other facilities, agency chief Akihiko Tamura said more high-tech solutions should be used. Another idea for making use of the revenue is aimed at helping Japanese who travel abroad.

Jiji Press reported that the tourism agency is considering creating a system to quickly confirm the safety of Japanese travelers during emergencies. According to the agency the number of inbound visitors hit a record 24.04 million last year, up 21.8 percent from the year before.

This year the number is expected to top 28 million, it said. Along with the surge, spending by inbound tourists grew to ¥3.75 trillion — compared to ¥1.08 trillion in 2012.

Do other countries have a similar tax?

Many countries have similar systems under different names.

Australia charges a AU$60 (¥5,200) departure levy called the Passenger Movement Charge, according to the government.

The U.S. collects $14 (¥1,570) from international travelers from countries in its visa waiver program under the Electronic System for Travel Authorization (ESTA).

Britain’s Air Passenger Duty (APD) imposes between £13 (¥1,860) and £450 (¥62,600) to departing travelers.

The rates differ based on flight distance and cabin class — a system meant to collect more from wealthy travelers. In 2015, the APD brought in some £3.1 billion (¥443 billion).

South Korea also imposes a 10,000 won (¥960) departure fee on air travelers, according to the Japan Tourism Agency.

Are there other travel-related taxes?

The Tokyo Metropolitan Government and the Osaka Prefectural Government impose a lodging tax, charging between ¥100 to ¥300 per person per day, to finance tourism promotion and related measures.

Kyoto, which has seen a surge in the number of international travelers, plans to follow suit starting next October.

In fiscal 2016, Tokyo earned a total of ¥2.5 billion from the levy.

Osaka, which introduced the accommodation tax last year, is expected to earn ¥1.1 billion per year according to data provided by the Japan Tourism Agency. Some municipal governments also charge a so-called bathing tax of around ¥150 per person.