The Travel Industry Compensation Fund levy rate will be reduced to zero with immediate effect. Hong Kong’s Commerce & Economic Development Bureau said suspending the levy collection will cut travel agents' operating costs, helping them weather the global economic downturn.
The Fund was established in 1993 to provide ex-gratia payments to an outbound traveller in relation to loss in respect of the outbound fare or in relation to a loss suffered due to an accident, resulting in the death or personal injury of that traveller. The Fund levy was payable at the rate of 0.15% of every outbound fare.
The suspension will not affect the board's ability to meet its statutory obligations in ex gratia payments, even under an assumed worst-case scenario involving the default of two large travel agents and a number of small agents.
There will be an adjustment mechanism, triggering thresholds for suspending or resuming the levy collection. The buffer level will be set at USD500 million, above which the board will suggest levy suspension. The prudent level will be set at USD400 million, below which levy collection will resume.
The mechanism will enhance the levy-setting process's transparency and allow a predictable and timely response to market situations. At the end of June 2009, the fund balance stood at USD528.6 million.
A recent consultation found support for the suspension proposal among travel agents, the Travel Industry Council, the Consumer Council and the public. Although the levy is suspended, protection to package-tour outbound travellers will not be affected. Travel agents must still contribute 0.15% of every outbound fare received as the Travel Industry Council levy.
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