The Federal Government has responded to pressure and dropped its plan to introduce a 32.5 per cent tax on working holidaymakers, instead applying a 19 per cent tax rate.

A $10 million fund for the tourism sector to market backpacker jobs has been setup and the passenger departure tax will be increased to offset the lower tax rate.

Tasmanian Greens Senator Peter Whish-Wilson said the lower tax rate was still an unacceptable burden on the horticulture industry and the party would vote against the new proposal.

“The treasurer is producing rotten eggs and is trying to sell it as pavlova,” he said.

“This is a new tax on low income backpackers, and it’s a tax on agricultural production in this country especially for the fruit growers.”

Independent Senator Jacqui Lambie said she wanted the Federal Government to match New Zealand’s backpacker tax rate.

Ms Lambie said when legislation for the new tax rate comes to the Senate she would introduce amendments to lower the tax rate to 10.5 per cent.

“When it comes to competing for vital backpacker farm labour and tourists, New Zealand is one of our biggest and most aggressive competitors,” she said.

A seasonal worker picks Riesling grapes at a vineyard outside Canberra.

“So it makes sense for our Government to at least reduce our backpacker tax rate to one that’s competitive with New Zealand.”

Changes may be too late: MP

State Labor MP Brian Mitchell said the ALP would examine the government’s proposal in detail before deciding whether or not to vote for it.

He said he feared the government’s retreat on the proposed backpacker tax may have come too late for Tasmanian fruit growers.

“I think they need to be looking at measures for this season.”

“Now, if we can get backpackers in for this season, fantastic, but the advice I’m getting is that farmers need people on farms now, not next week or in two weeks, they actually need to be picking fruit and vegetables now, and as I say hopefully this has come not too little, too late.”

Tasmanian Farmers and Graziers Association chief executive Peter Skillern said he was confident it was not too late to lure backpackers who may have been deterred by the increased tax rate.

“You could argue that it’s two minutes to 12, as it were, but I think no, having made that announcement [on Tuesday], that will give people time to recognise that Australia is now competitive on an international basis,” he said.

“Obviously backpackers are looking to come, or to travel overseas and will have been watching this debate.

“The fact that it’s resolved now is advantageous to us.”

-ABC