CORRECT: Tourism coalition claims government downplaying negative impacts of border clearance levy
(Corrects to add tax on departing passengers in third paragraph, recasts story to focus on industry reaction)
By Fiona Rotherham
Oct. 14 (BusinessDesk) - A tourism coalition opposed to a new border clearance levy on international visitors says the government has downplayed the negative impacts of the tax.
The government today confirmed the rate of the border clearance levy for all visitors arriving in and departing from New Zealand despite tourism industry calls for it to be scrapped altogether.
The levy, which comes into effect in January, will be $18.76 plus goods and services tax ($21.57) for air travellers and those arriving and departing by sea on private craft and $22.80 plus GST ($26.22) for cruise passengers. A public consultation document on the levy originally suggested the rate could be between $15.20 to $15.90 (GST exclusive) for arriving air passengers, and $19 to $19.70 for arriving cruise ship travellers, and $2.60 to $3.10 for departing passengers.
When the levy was first announced in the May budget last year, the government said it would be around $16 for arriving passengers and $6 for departing ones and the government has now said the higher tax on cruise ship passengers reflects the extra cost of processing them at the border.
After that announcement, a coalition of tourism, travel and aviation organisations was formed led by the Tourism Industry Association. It warned the tax would be an unwelcome handbrake on growing the visitor economy and that if imposed, the tax’s design, timing and implementation would need significant amendment.
The levy will help pay for increased biosecurity checks at the border, which have previously been funded by government.
TIA chief executive Chris Roberts said the tax ignores a long-standing understanding in New Zealand that border services are a public good and should therefore be funded from general taxation rather than a travel tax.
“Fortunately the tourism sector is currently performing very well, with international visitor arrivals growing by 8 percent in the past year,” he said. “However, the new tax will be enough to deter some people from travelling and could shave 1 to 2 percent off the current growth. In terms of visitor spend, New Zealand is set to lose more than it gains in the tax collection.”
A Sapere report commissioned by the Ministry for Primary Industries on the potential levy impact on travellers from seven key markets found it could reduce visitor numbers by between 11,000 and 56,000 a year or up to 2.4 percent on the forecast tourism growth rate of 5.4 percent and cut their expenditure by $51 million or 0.9 percent compared to current forecasts. The report said it would be a one-off impact in the first year of implementation rather than on-going.
The coalition made a number of recommendations including more detailed impact analysis on the levy’s impact on tourism, greater transparency on the cost structures for both Customs and MPI, and that the tax should be zero-rated for GST rather than being a tax on a tax. It also said a significant chunk of the funding for border services should remain Crown-funded as some direct beneficiaries of a secure border are not paying their share.
"More work needs to be done to determine the appropriate split, further supporting the need for delay," Roberts said.
The only concessions the government made to industry views was exempting air and cruise crew at a cost of around $56 million in foregone revenue, only some of which was absorbed by government with the rest spread over the remaining payers. The rate will be reviewed in July 2018.
The largest amount of foregone revenue among the exemptions were for those who have paid for a ticket to travel in the next year before the levy comes in on Jan.1.
Guy said the government had listened carefully to the concerns of the travel industry and stakeholders, and “this has informed the design of the levy”.
It will be collected by airlines and cruise operators when tickets are purchased and passed on to Customs, while travellers on private aircraft and yachts arriving in New Zealand, who account for just 1 percent of all travellers, will have to pay Customs directly when coming and going.
The tourism coalition said the proposed Jan.1 introduction of the tax doesn’t provide adequate time for the agencies responsible for collecting the tax to update their systems to incorporate the necessary requirements.
Wagner said the levy is low compared with other countries – Australia has a A$55 passenger charge and the United Kingdom has a 71 pound long-haul passenger charge, for example.