Comment

Tourist tax’s time has come

Tourism needs more support and significant investment at a time when calls on the Government’s cash is at a premium, writes Paul Drum

It was good to see the Government proposal to impose a levy on international travellers. It’s one of the measures our accountants have advocated for in their CPA Australia submission to the Tax Working Group.

There are solid reasons to impose a visitor levy, which is why our members support it when typically accountants would balk at measures such as an additional tax.

We face some unique challenges in the tourism space, partly because of its global popularity as a tourist destination and the attendant pressure on its infrastructure and the conservation estate.

But there is also the issue of New Zealand trading on its green credentials when there is already international reportage about visitors’ experiences of Godzone’s natural splendour failing to meet expectations because of over-crowding, pollution and rubbish.

There is a very real danger that if the mismatch between visitor expectation and reality on the ground is not addressed or it deteriorates further, then New Zealand’s brand could take a serious hit that will take a generation to rebuild. Just ask Cadbury, once the country’s most trusted brand, how easy it is to lose the confidence and trust of customers.

Tourism is consistently one of our top two export earners and the largest services export. In the year ending March 2016, the sector contributed $14.5 billion to the country’s accounts, nearly 21% of total exports.

Nearly four million people visit every year and that number is forecast to increase to 5.1 million by 2024.

Behind those headline figures is an equally important factor, employment. Tourism-related jobs account for nearly 8% of all people employed in New Zealand and, in particular, it is a key employer for low-skilled workers and plays a vital role in supporting low-income families.

This is an industry that needs more support and significant investment at a time when calls on the Government’s cash is at a premium given historical underinvestment across the economy.

Polluted waterways, crowded tracks and insufficient accommodation, the tourist infrastructure deficit and litter are but some of the issues requiring remedial action now and in the coming years.

A lot of money needs to be spent over several electoral cycles to protect New Zealand’s vital tourist industry. But not all of it is remedial; investment will be needed to future-proof the industry and provide value-added experiences to bring more visitors to the country.

That’s why it was encouraging to see the Government, in partnership with local councils, provide financing to the Mt Ruapehu luxury gondola project. The $25m development will see 50 cabins, with floor-to-ceiling glass traverse 1.8km over the Whakapapa Skifield, including views of waterfalls and other wonders.

This is a commercial venture, which will have considerable appeal to higher-net worth tourists, with 300,000 extra visitors, $50m in additional spending and the creation of more than 120 jobs forecast.

The Government is lending $10m and the councils about $500,000 to ensure the project goes ahead. Money well spent in terms of return, given the relatively low risk of non-repayment.

But it does beg a very large question about who should pay for the required big tourism infrastructure build, given the private sector cannot do all the heavy lifting in terms of capital and construction.

Much of this will be the Government’s job and it’s fair to ask whether this expenditure should rest solely on the shoulders of taxpaying New Zealanders.

To fund New Zealand’s future, additional revenue streams are needed and it is entirely appropriate to ask tourists to pay their fair share too.

A small impost – the Government is citing $25-$35 – is small beer in terms of the overall travel cost and will not deter visitors coming here. It can simply and easily be collected, either through a new Electronic Travel Authority or the visa application system as the Government proposes, and then ring-fenced for expenditure on a sector that is critical to New Zealand’s future prosperity.

Paul Drum is Head of Policy, CPA Australia, which represents more than 2,000 New Zealand accountants

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