Modelling confirms the revamped backpacker tax puts Australia on a competitive footing with New Zealand, the United Kingdom and Canada says Treasurer Scott Morrison in a spirited defence of the new measures amid complaints from tourism that it is subsidising agriculture.
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Facing criticisms that tourism was funding - through a $5 increase in the passenger departure tax - a government backdown on the proposal to impose a 32.5 per cent tax rate on non-resident income, Mr Morrison said analysis done for the government showed "the wages that are paid in Australia are greater than in a lot of these other economies and the analysis shows that the money in the pocket of the backpacker after this change would be the same here as it would be in NZ or the United Kingdom, Canada or other competitor countries".
He rejected tourism industry criticism that the government was using it as a "cash cow" to fund the reduction in the proposed tax rate to 19 per cent, a move welcomed by agricultural industries alarmed the original tax rate would starve them of seasonal workers from the ranks of backpackers.
"The backpacker industry is $5 billion a year or thereabouts for the tourism industry," Mr Morrison told Sky.
The government's move to cut the visa application charge for backpackers by $50, and cut the income tax rate would support tourism," he said.
"These backpackers are spending this money on the tourism industry and regions all across the country, so [tourism operators] are the principal beneficiary of these measures."
However, "these measures have to wash their face.
[Tourism operators] were the ones particularly arguing that this had to be addressed, because this was not good for tourism, so we've done that but at the same time, we're not going to have the budget impaired, and just like we did on superannuation, when we resolve these issues, we do it without impairing the budget."
Mr Morrison said backpackers "should have a working holiday, not a tax holiday".
"If people are saying we should be allowing foreigners to come and work and not pay tax or pay lower rates of tax than Australians would, I don't think Australians would share that view.
"I think the measures we announced strike the right balance and ensure that the budget is not compromised at all and that is very important.
“We can't go around paying for backpackers by having Australians pay higher taxes on their incomes or other things like that.
"So I think this is the right balance."
The Treasurer said the issue had been around for most of this year and the government committed to resolving it on the other side of the election.
"Our policy was actually the same as the Labor Party at the last election," he said.
"They said they would review it after the election as well.
“They didn't have an alternative at the election so I think they will agree this is a common sense resolution."
After some initial talks with the Opposition on the new package on Wednesday morning, Mr Morrison expressed confidence he could persuade Labor and crossbench senators who had expressed concerns about the competitiveness of the backpacker industry that these issues had been dealt with.
- This article first appeared in the Australian Financial Review.
