Ministry says tourists pay 'fair share' to government as tax decision nears

Author
NZ Herald,
Section
Business,
Publish Date
Wednesday, 13 June 2018, 9:34p.m.
New Zealand's natural beauty is a drawcard for tourists. Photo / Grant Bradley
New Zealand's natural beauty is a drawcard for tourists. Photo / Grant Bradley

The tourism industry is on tenterhooks before an announcement on new ways of taxing international visitors as a Government-commissioned report says they already pay a ''fair share'' of costs.

The Ministry of Business, Innovation and Employment report for ministers considering the ''international visitor conservation and tourism levy'' said the results showed how well existing systems recovered costs and to what extent they were being used.

''It also shows that, as a share of New Zealand's population, international visitors make a fair contribution to the costs of Government,'' the ministry said.

The report written by Deloitte found the Government made a net gain of $2.6 billion from overseas tourists but ministry advice to ministers says this is best spent on the country's highest priorities through the budget process.

Tourism Minister Kelvin Davis is expected to release details of the new tax on Friday and the industry is worried it may be very complicated and wants to know how it will be spent.

Labour campaigned on a $25 levy on all tourists, but there are indications visitors from Australia and the Pacific Islands will be excluded.

Tourism Industry Aotearoa said it would be costly to collect.

''And if a large percentage of our visitors are excluded, does that mean everyone else will be required to pay more than the $25 that Labour campaigned on?'' the organisation said.

TIA chief executive Chris Roberts said the report noted tourism had a growing importance in the ongoing success and wellbeing of New Zealand businesses, households and Government.

"At a time when the Government is planning to introduce another tax – a new border levy on some of these international visitors – it is extremely helpful that we now have some data showing the size of the contribution these visitors are already making," Roberts said.

Airlines have said they will incur extra costs if they were asked to collect a differential tax. Industry group, the Board of Airline Representatives, said its members were fed up with being a tax collection agent and that it would be ''blatantly unfair'' to ask them to collect another one.

TIA was also keen to know how the tax would be spent.

''Will it be ringfenced for tourism purposes? There's sure to be plenty of councils putting their hands out – who will decide who has the best tourism-friendly projects?'' the organisation says.

The Deloitte report for MBIE showed the government collected $3.27b a year in revenue attributable to international tourism, and incurred costs of $638m, for an annual net gain of more than $2.6b.

The largest source of revenue from overseas tourists was GST, estimated to be worth $1.47b in the year to June, 2017. A further $1b was collected indirectly through income taxes from tourism sector workers and company taxes.

Other sources of revenue included duty on alcohol, gambling taxes and tobacco excise ($41m), the border clearance levy ($37m), withholding tax ($34m) and Department of Conservation revenue ($14m).

Of the $638m spent to support tourism, most goes into roads and public transport ($328m), Tourism New Zealand ($117m), the work of Immigration and Customs ($100m) and DOC ($60m).

ACC expenditure was $4m - from a total of $4.9b in payouts a year.

MBIE advice to 12 ministers involved in considering the tax concluded more infrastructure investment was needed, and options included higher user charges for overseas visitors using DOC facilities and levies, targeted rates and taxes.

''There is scope for councils to use additional targeted rates on different types of businesses to reflect the costs of the services they benefit from,'' the briefing paper said.

It also dealt with ''recycling'' crown revenue from GST paid by tourists and/or Air New Zealand dividends.

'While it's true that [the] Crown benefits from tourism, this money is included in Treasury's forecasts — it is not new windfall.''

Revenue from tourists is spent on core functions of government such as health, justice, education and welfare, ''which help make New Zealand a safe and attractive destination".'

While central government comes out on top of the tourist revenue-expenditure equation by a wide margin, three local authority case studies done by Deloitte paint a different picture.

The Southland District Council has revenue attributable to international tourists of up to $15.5m but spends up to $17m on them. Nelson City benefits by up to $6.5m but spends up to $7.2m, while Auckland collects up to $103m but spends up to $137m.

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