Japan’s proposed departure tax draws mixed views
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Japan’s planned introduction of a “departure tax” on international travelers has received a mixed response, with many questions yet to be answered about how the revenues will be spent.
Hopes are high that the recent tourism boom will continue beyond the 2020 Tokyo Olympics and Paralympics, when the government aims to attract 40 million visitors to the country that year.
But the surge in visitors is also making it imperative for debt-ridden Japan to secure enough funding to improve infrastructure and services for foreign tourists in a country that prides itself on its “omotenashi” hospitality.
Some visiting tourists appear supportive of the move to require each passenger to pay 1,000 yen (S$11.85) every time they depart Japan by air or sea. But other travelers, including Japanese going abroad, are unconvinced how they are going to benefit from it.
“Paying a tax does not sound good,” said Ms Wang Pei Hsien, a 47-year-old tourist concluding a six-day visit from Taiwan.
“But if I can get better services here, I think it is OK,” she said before flying out of Tokyo’s Haneda airport.
The ruling coalition of the Liberal Democratic Party and Komeito party included the introduction of the new tax for international travelers in their reform package approved earlier this week.
To spur spending by foreign tourists like Ms Wang, who bought clothes, children’s toys and medicine in Japan, the ruling bloc decided to simplify the existing tax-free system.
Currently, at least 5,000 yen needs to be spent on general goods such as home appliances or on disposable items such as cosmetics and medicine to qualify for the tax exemption.
But the plan is to enable foreign shoppers to combine them to reach the 5,000 yen threshold.
Japan has seen a surge in foreign visitors in recent years, with the number already hitting a new record in 2017, exceeding the previous high of over 24 million last year.
In 2016, the number of departures from Japan stood at around 40 million, meaning that had the departure tax already been in place it would have generated revenues of some 40 billion yen.
“But if I can get better services here, I think it is OK,”
“It all comes down to how the money collected is going to be spent,” said Ms Yumi Hori, a 27-year-old Japanese who was at Haneda waiting for her flight to Canada. “I wish wi-fi connections were better here.”
Her view was echoed not only by other travelers but also officials and tourism industry professionals.
The government is seen as hurrying to seize the opportunity to step up preparations for hosting the Olympics and Paralympics, even though experts say it should also look beyond the event to boost tourism.
Since the idea of the departure tax emerged earlier this year, a panel of experts drew up a report on how to secure funding to make Japan a “tourism-oriented” country.
In the report to the Japan Tourism Agency, the panel said a tax of 1,000 yen or lower should be “viable,” after studying examples from other countries and weighing the potential impact on foreign travel demand.
Australia, for instance, charges AUS$60, or about 5,200 yen, when a person leaves the country, while South Korea requires each air passenger to pay 10,000 won, or about 1,000 yen, and 1,000 won when departing by sea.
As recent brisk travel demand from Asian countries has been supported by low-cost carriers, economists say the introduction of the departure tax may have some impact, a concern raised by the travel industry.
Mr Takayuki Miyajima, senior economist at the Mizuho Research Institute, said it could test Japan’s seriousness about boosting inbound tourism, a must for its longer-term economic growth.
“The tax revenue should be used to build infrastructure and enhance connectivity to regional areas for foreign tourists, which will help revitalize these areas,” Mr Miyajima said.
“But Japan also needs to tackle its increasingly severe labor shortage, especially in the services sector, and spending money to do something about it could be an option.”
Questions & Answers
Q.What is the primary motivation for Japan introducing this new departure tax on international travellers?
What is the primary motivation for Japan introducing this new departure tax on international travellers?
The government aims to secure enough funding to improve infrastructure and services for foreign tourists. This is particularly important given the recent surge in visitors and Japan's debt, with hopes the tourism boom continues beyond the 2020 Tokyo Olympics and Paralympics.
Q.How much will international travellers be required to pay under the proposed departure tax?
How much will international travellers be required to pay under the proposed departure tax?
Each international traveller will be required to pay 1,000 yen every time they depart Japan. This applies whether they are leaving by air or by sea, and is equivalent to S$11.85.
Q.What other changes are being considered to encourage spending by foreign tourists in Japan?
What other changes are being considered to encourage spending by foreign tourists in Japan?
The ruling bloc plans to simplify the existing tax-free system. Currently, a 5,000 yen spend is needed for tax exemption, but the new plan will allow foreign shoppers to combine purchases of general goods and disposable items to reach this threshold.
Q.What were the potential revenues if the departure tax had been in place last year?
What were the potential revenues if the departure tax had been in place last year?
If the departure tax had already been in place in 2016, with around 40 million departures from Japan, it would have generated revenues of approximately 40 billion yen. This calculation is based on the proposed 1,000 yen per departure.
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