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Tourism industry disappointed at bed tax proposal

Tourism Industry Aotearoa agrees that local authorities need a helping hand to support the growth of tourism, but is disappointed that the Productivity Commission has defaulted to bed tax.

The Commission’s draft report on local government funding and financing makes it clear that councils can improve their use of existing funding mechanisms and increase use of user-pays.

But it also recommends a new tax to be paid by New Zealanders and international visitors in the form of an accommodation levy.

“While this might seem like an easy solution, it will not succeed in making visitors pay their fair share,” TIA Chief Executive Chris Roberts says.

“Last night, for every 100 of our domestic and international visitors, 30 spent the night in commercial accommodation, 7 in an Airbnb or holiday house, and almost all the rest enjoyed free accommodation, mainly with friends or relatives. So the Productivity Commission’s solution will fail to reach two-thirds of our visitors, even though they are using the same council facilities as those staying in commercial accommodation. There is nothing fair about that.”

The proposal would also see New Zealanders paying the most bed taxes, as Kiwi travellers account for 60% of all commercial bed nights, Mr Roberts says.

“New Zealand doesn’t need new taxes. What we need is to find ways to better share the taxes and charges we already collect.”

TIA acknowledges that some councils have struggled to respond to the growth in tourism over the past five years. Combined with population growth, it has highlighted decades of under-investment in much council infrastructure.

However, it is ironic that the Productivity Commission proposal comes at a time when annual visitor arrival growth has fallen to well under 2% a year.

The Commission should take a closer look at the national solution proposed by TIA, to return the equivalent of 20% of the GST already collected from international visitors and distribute these funds via a Trust to Local Government to address local tourism-related needs, with the allocation determined by the measured level of visitor impact on each territorial local authority, Mr Roberts says.

“Visitors are already more than paying their way, with international travellers paying $1.7 billion a year in GST. A number of councils around the country support TIA’s proposal and have put forward a remit to next week’s Local Government Conference.”

TIA is preparing a response to the Commission’s draft report and will also discuss the issues raised with Government Ministers.

Read TIA’s submission to the Productivity Commission here. Our subsequent letter with more detail on the GST proposal is here.

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