Jim Eagles: Cullen springs mean surprise

Welcome to the New Year. Did you have a good break? I hope so. But you may not have noticed that while you were preoccupied with the hustle and bustle of the festive season, Minister of Finance Michael Cullen slipped a nasty little surprise into the stockings of all travellers.

Just before Christmas, the traditional time for governments to give out unpopular news while no one is looking too closely, Cullen explained how he planned to fund the extra aviation security costs arising from the war on terror.

And, surprise surprise, it will be paid by airline passengers.

Cullen has cunningly muddied the waters by tinkering with the overall system for funding border security and by offering three possible options for meeting the extra costs.

But the bottom line is that the present departure tax raises $19 million a year towards security and he plans to crank it up to $49 million a year.

That, of course, is chickenfeed to a government that has a $7.4 billion operating surplus ( witness the fact that at the drop of a hat it was able to find $50 million to keep Westhaven in public ownership).

But Cullen has never been able to resist the opportunity to suck some extra money into his coffers so he can then hand it out to selected beneficiaries.

After all, he even made importers and exporters pay the extra $20 million it cost to meet trade security requirements imposed by the United States.

To justify the latest tax grab, Cullen says the Government has "adopted a 'primary beneficial model' in which costs are allocated according to where the principal benefit is derived".

As a result "the full cost of aviation security will be met by the airlines and passengers as the prime beneficiaries of the service".

That is bunkum.

First, it ignores the huge overall national benefit from having safe airlines to bring in tourists and take our exporters and trade negotiators overseas.

Second, it ignores the fact that airline travellers are likely to have paid more than their fair share of taxes generally, including GST on their airfares.

Third, the "primary beneficial model" is applied with remarkable selectivity (for instance, there's no tax on restaurant dining to cover the cost of maintaining food safety), presumably because travellers are seen as a disparate group unlikely to display their displeasure in any co-ordinated fashion at the ballot box.

That political judgment is probably correct, but travellers should think about it when the new departure taxes come into force in the months ahead.

At present, anyone leaving from one of the country's seven international airports has to fork out $25, made up of $20 to the local airport company, $1 to the Civil Aviation Authority and $4 for passenger screening.

Depending on which of the three tax collection options is finally selected, the departure tax is likely to go up by $3 to $4 at Auckland, $3 to $10 at Wellington and $3 to $7 at Christchurch.

But at smaller provincial airports the impact is likely to be more severe. The increase could be anything from $2 to $25 at Hamilton, $10 to $36 at Palmerston North and up to $122 at Queenstown.

For most of us that is not an horrendous burden. But it is an annoyingly unfair one.

It is also another step towards making our tourist industry less competitive than countries such as Fiji, Singapore and Hong Kong, whose departure taxes are already lower than New Zealand's.

What we should be doing is looking for ways to make New Zealand more, rather than less, attractive to tourists.

Perhaps Cullen could reconvene the working party he set up to look at funding the extra security costs and get it instead to consider the validity of departure taxes in the first place.

Air traffic control and airline security are, like maritime safety or road traffic control, clearly areas that provide a general national benefit and should be funded out of the exchequer.

And why on earth should departing passengers have to give Auckland International Airport Ltd $20 a time for the privilege of flying out?

The company is a hugely profitable monopoly. Airlines already pay whopping charges to land their planes and take off. Shops and cafes pay huge rents for the privilege of having all those passengers walk past their doors. Travellers already have to pay fat fees if they want to leave a car there.

What's the justification for a passenger levy as well? It's a bit as if Westfield decided to charge customers for the privilege of going into St Luke's to shop. Ridiculous.