'Tax Holiday' for Travel and Tourism's Revival

Looking through a positive outlook, Ashwini Kakkar, Chairman of Action Against Hunger India, pens down his thoughts and suggestions in terms of industry’s recovery path.

As 2020 ended, we all became older and wiser and will hopefully have a vision, especially with regard to the Travel & Tourism industry, which has come out as a 'Must Survive' industry, if for nothing else, then for the over 10 per cent contribution that it makes to world GDP, around 10 per cent employment that it provides to the world employable population, for the peace and harmony that it engenders through people to people contact and universal wellbeing, joy and happiness quotient it adds across caste, creed, colour and socio-economic strata all across.

The year in our rearview mirror, saw the loss of millions of lives, millions of jobs, the demise of millions of business (mostly small & medium enterprise) and triggered a worldwide recession. India too went through its own share of suffering, but the most severely affected sector in all this, was the global and the Indian Travel and Tourism Industry.

Most countries came up with bailout packages for their people and for the various sectors of industry, with handouts or furlough programs or loan programs etc. including our own Government which put in tremendous effort. However, realising that this industry would take time before it could revive, in terms of revival packages, we hope that for the Travel & Tourism industry the Government has saved the best for last. A strong package for this humongous sector will go a long way in reviving employment and providing a huge multiplier for our GDP.

While our ministry has displayed amazing agility and launched the "Dekho Apna Desh" initiative and has already embarked on the creation of a New Tourism Policy, the harsh reality of the industry is, that Hotels may end up losing around one lakh crores in revenues, Travel Agents & Tour operators about 60,000 crores in revenues and Airlines may end up with an actual loss of over 20,000 crores.

On the other hand, the taxation structure on this industry is complex, unwieldly and untenable with multiple slabs on multiple elements in multiple ways. In any case too complex and too high for providers of services, who are reasonably tech-savvy and fighting to protect our ecology. It must also be recognised that with the emergent Work from Home (WFH) culture, in the coming years, corporate travel is likely to remain muted and the industry will have to work harder and innovate to make up this lost ground from other areas of operation. Consumer behaviour will certainly get altered in various ways as we come out of this crisis with low risk adjusted, invitational prices driving pent up demand, but price elasticity will be tested with fewer planes, cruise liners etc. operating at higher price points. This may get exacerbated by a rise in inflation and unemployment. Fortunately, the concurrent, twin challenges of a pandemic and economic recession may both dissolve in the face of multiple pharmaceutical and financial vaccinations on the horizon.

Looking forward, if current vaccine orders are fulfilled, the EU would have enough to inoculate all its residents twice, Britain and the US could do it four times over and Canada six times over, according to New York Times. In addition to the surpluses, there would be the Chinese, the Russian and other products which would also add to availability. These numbers have serious ramifications for our industry in 2021 and 2022.

With over a billion people inoculated during the course of the first year itself, these persons who have suffered months in a locked down state are likely to be candidates for what I call Revenge Tourism or Tourism with a vengeance. Some of these will be Indians whom we can entice for domestic leisure travel and a lot will be foreigners whom we can get to come to India. These two segments are worth around US$ 30 billion each, totalling to 2.25 lack crores.

What I propose for the Government and our Honourable Tourism Minister is that firstly we announce a complete “Tax Holiday” for the Travel & Tourism Industry including all sub-segments: Airlines, Hotels, Rail, Road, Cruises, Tour Operators, Travel Agents, OTA’s, Monuments, Museums etc. for two years (2021-’22 & 2022-’23).

This will enable many positives, in a situation where not much is being collected anyway as of today.

It will act as an invitation to customers to travel

It will reinstate most of the shaky/lost jobs of 60 million.

For the Government, it will be a huge Multiplier for Economic Activity

For providers (Hotels, Airlines, Tour Operators/Travel Agents) it will provide a lifeline.

For the Nation, it will provide a boost to GDP Growth.

This combined with a welcoming campaign will give us a tremendous first mover advantage across the world and we may even be able to divert some inbound from other large Asian Inbound markets (eg. China with 60+ million arrivals). 

A second measure that is equally critical is to work with global agencies for harmonisation of travel/health documentation. So we can work with UNWTO, WHO, WTTC and IATA, towards a universal Health Pass, or a Fit to Travel card, which could be linked to Aadhaar cards or QR Codes etc. These would also provide a kick start to the industry if they are implemented quickly. It is also time that the Government accorded “Industry Status” to the entire tourism industry including all its sub-segments. Being probably the largest contributor to GDP and to employment, the industry certainly deserve it and desperately needs it. Among other things, this would alleviate some of the working capital, liquidity, financing costs, banking and other issues faced today. In the near term, liquidity is probably the biggest issue facing the industry as it has bravely tried to carry through the covid period, almost all its employees albeit at reduced wages. In some countries support has been forthcoming through Furlough Schemes to reimburse part wages to the employer. In other countries and other sectors in India, our Government has tried to stimulate bank lending through banks and financial institutions. For this sector too, this is the need of the hour and we urge the Government to provide this support in any manner that it deems fit.

So, in summary:

We have gone through torrid times. We are looking forward positively and trying to convert adversity to opportunity. At this juncture, the Government must be proactive and if it is, the country and industry will reap rich dividend. What is needed most is four things from the Government:

Tax Holiday for entire industry for two years

Industry status for Travel & Tourism

Working with UNWTO/WTO for Travel Health Pass

Provide low-cost liquidity to the industry

We are confident that with the industry’s vision, resolve, capabilities and some Government support, it can certainly provide the flight path, to a strong economic recovery for our nation.


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