LGNZ welcomes the Government’s acknowledgement today, in its announcement of a proposed International Visitor Conservation and Tourism Levy, that visitors who use community facilities should contribute to the cost of those facilities.
This is a significant and principled step forward from the present position where ratepayers solely fund both the capital and operational costs of tourism mixed-use infrastructure and facilities.
“The debate now needs to move to how that money should be collected and allocated.”
“LGNZ has for many years been advocating for a greater contribution from tourists to the ongoing costs of mixed-use infrastructure, particularly in areas such as Queenstown, Central Otago and the West Coast where there are very high number of visitors compared to the number of ratepayers,” says LGNZ Chief Executive Malcolm Alexander.
LGNZ says that, for several reasons, the Government’s visitor levy proposal is not the favoured approach.
“The preference is for a local tourist accommodation levy, commonly used around the world. Such an approach would allow councils to decide whether they wished to continue subsidising tourist infrastructure or meet part of the costs through a levy.”
“This would introduce a competitive aspect to location taxation that would drive performance improvements and incentivise a community to enhance the local value offering for tourists to tempt them to stay in a region. This approach would break the cycle of benefits being captured entirely by central government but local communities bearing the costs.”
LGNZ says that a levy collected at the border is another central government revenue mechanism that may only partially go to local government. LGNZ questions whether the levy will meet the infrastructure gap.
“With a limited pool of money, it is likely that a grant approach will fall well short of meeting the needs of local communities on the ground, particularly for ongoing operational expenditure to maintain and operate assets.”
“The Government’s visitor levy proposal is estimated to collect $57-80 million annually. Assuming a share of this will go to conversation activity this leaves local government well short of funding the infrastructure deficit of $1.38 billion, as identified by the April 2017 report by Deloitte New Zealand commissioned by Tourism Industry Aotearoa and supported by LGNZ.”
A recent MBIE report Financial Costs and Benefits of International Tourism shows the tourism industry has been enjoying substantial growth and in the year ended March 2017, tourists generated $3.3 billion in GST revenue. This tax revenue is collected at the central government level but the costs of provision fall on local government, or more specifically their ratepayers.
Mr Alexander says, “With forecasts for the 2018-2024 period showing visitor arrivals to grow 4.6 per cent a year the assumption that ratepayers are going to continue to afford to, or want to, subsidise the provision of mixed use infrastructure is wrong.”
“New Zealand ratepayers have been subsidising the tourism sector in the form of mixed-use infrastructure provision (infrastructure used by local citizens and tourists such as local roads, other transport, drinking water supply, wastewater services and solid waste refuse, car parking, freedom camping sites and public toilets) funded mostly through property taxes (rates) during a period of strong growth.”
LGNZ says any funding mechanism must cover both capital and operational costs.
“Local councils will not build infrastructure if the ongoing costs cannot be met without raising rate levels for locals. Operational and maintenance costs require both certain and ongoing revenue streams which grant schemes are not well-suited to fund.”
LGNZ looks forward to working with the Government to explore a full range of policy options and will be submitting later in the month on the Government’s proposal and on the Productivity Commission’s upcoming review of local government funding.
“It is time to ease the financial burden on ratepayers,” says Mr Alexander.