The Travel Industry Compensation Fund levy rate, currently set at 0.15% of outbound fares, will be reduced to zero with immediate effect.

The Commerce & Economic Development Bureau said today suspending the levy collection will cut travel agents' operating costs, helping them weather the global economic downturn. The change was published in the Gazette today.

The Travel Industry Compensation Fund Management Board's recent consultation found support for the suspension proposal among travel agents, the Travel Industry Council, the Consumer Council and the public.

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 with triggering thresholds for suspending or resuming the levy collection. The buffer level will be set at $500 million, above which the board will suggest levy suspension. The prudent level will be set at $400 million, below which levy collection will resume.

The mechanism will enhance the levy-setting process' transparency and allow a predictable and timely response to market situations. Up to the end of June, the fund balance stood at $528.6 million.

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.