Published On: Tue, Jul 28th, 2015

New Zealand Tourism: Border tax will be handbrake on expanding visitor economy

Billboard Welcome to New Zealand at Sunrise.A heavyweight travel industry coalition is calling for New Zealand Government to rethink its border tax which it says could wipe more than $100m a year from visitor spending.

The group says it has uncovered documents that show there is no basis to assertions by Prime Minister John Key, who is also tourism minister, that the tax would not make a “blind bit of difference” to visitor numbers.

The Coalition Against Travel Tax (CATT) says the “Border Clearance Levy” introduced in the May Budget will be a handbrake on expanding the visitor economy.

The tax is aimed at funding increased work by Customs and by the Ministry of Primary Industries as the number of arriving air passengers increases.

The proposed maximum amount payable for a cruise ship traveler on a round trip is $26.22 and for remaining travelers is $21.85

While horticulturists have welcomed extra funding to help keep our pests, the coalition says there will be no benefit to the economy from the tax.

Analysis for the government by Sapere Research Group which has been released under the Official Information Act shows ministers were told the travel tax would reduce the number of international visitors buy 1.4 per cent and international spending by 0.9 per cent.

The coalition calculates this would equate to 44,000 visitors and a lost annual spend from international visitors of $104 million, about the same it is estimated the tax will collect.

Among the coalition is the Tourism Industry Association, a group representing airlines, accommodation providers and the Tourism Export Council.

“The risks are all negative and the proposal does not align with a government that is publicly committed to boost economic productivity and supporting businesses to thrive.” said TIA chief executive and coalition spokesman Chris Roberts.

If it is to be imposed, its design, timing and implementation needed significant amendment.

The tax was put together in haste immediately before the May Budget with very limited analysis and no consultation which has annoyed the tourism sector.

“It ignores a long-standing understanding in New Zealand that border services are a public good and should therefore be funded from general taxation,” said Roberts.

Further analysis from the international airline and cruise industries suggests the $104 figure underestimate the impact of the tax..

New Zealanders will make up almost half of the travelers required to pay the tax.

Outbound passengers were a crucial element in airline economics.

Any discouragement of outbound travel may impact on the economics of airline services and adversely impact on air connectivity.

Legislation passed immediately following the Budget clears the way to impose the Travel Tax but does not require that it be imposed, Mr Roberts points out.

“A secure border is in the interests of every New Zealander and certain sectors that are direct beneficiaries are not contributing to the cost under these proposals.

“If the Government insists on moving away from the public good model, the cost burden should be shared,” said Roberts.

“More work needs to be done to decide the appropriate split, further supporting the need for delay.”

The coalition wants any travel tax to be zero-rated for GST, to avoid a tax on a tax.

It also wants the establishment of a traveler reference group to monitoring how the funds collected are allocated each year.

Roberts says the Government should engage with the sector to properly understand the potential impact of the tax.