Douglas tourism operators fear a proposed new tax on backpackers would “decimate” the local industry and severely impact the region’s economy.

As part of its bid to raise an estimated $540 million in extra revenue for the Federal Budget, the Turnbull Government wants to target backpackers and people on working holidays by scrapping the tax-free threshold for those on 417 visas.

Under the Budget changes due to take effect in July, people on a working holiday will have to pay 32.5 cents in tax for every dollar of income up to $80,000. They could previously earn nearly $20,000 tax-free.

Coral Beach Lodge owner-manager Tom Quealy told Newsport the changes were “crazy and silly” and failed to take into account broader economic impacts.

“When we get to the high season about a third of my guests are backpackers looking for work,” Mr Quealy said.

“When they get that work, they pay my salary and my staff’s salary, and then we go and spend money in the local economy and the cycle goes on.

“Most importantly that money stays in this area. So this tax change will hurt everybody, and not just me as an accommodation provider.”

Mr Quealy urged the Federal Government to take a “gentler approach” on the issue.

“I’m not saying backpackers shouldn’t pay any tax but 30% from the first dollar is just crazy,” he said.

“The politicians in Canberra need to rethink this policy or we’ll lose our backpacker market because they’ll go to other countries.

“Backpackers should pay some more tax but we shouldn’t burn them with a stupid amount of tax like 30%. It’s treating like them earning $100,000 and that’s just silly.”

Federal Member for Leichhardt Warren Entsch raised concerns about the tax changes during a Coalition partyroom meeting in Canberra on Tuesday, backing the calls by tourism operators such as Mr Quealy.

“When we first started talking about the ‘backpacker tax’, I had some reservations but I understood the arguments behind it and what we were trying to achieve,” Mr Entsch said.

“Since then, I’ve spoken to people like Joe Moro from the Mareeba District Fruit and Vegetable Growers Association, as well as individual farmers, a number of operators in the tourism industry and the Restaurant and Caterers Association.

“In their view, the tax is going to be a real disincentive to young people coming here for a working holiday and will diminish the available workforce in northern Australia.”

Mr Entsch has proposed a change in the tax rate from 32 per cent to 27 per cent, a rate he believes is more reasonable.

“A lower rate than the original 32% proposed would mean backpackers are still contributing from the first dollar they earn, but it brings the tax down to an acceptable level,” Mr Entsch said.

“It’s less complicated for the employer as they have to pay superannuation anyway so could just pay it direct to the employee, and the backpackers themselves would spend more of their earnings in-country.

“It’s just a proposal, but there was very strong support in the Party Room and I was heartened by the fact that the Treasurer has now agreed to review the ‘backpacker tax’ and to have further discussions.

“I look forward to hearing what comes of this.”