The Government must rethink its new Travel Tax because it is bad policy which will harm New Zealand’s economy, a coalition of tourism, travel and aviation organisations says.
TIA CEO Chris Roberts
The Coalition Against Travel Tax (CATT), led by the Tourism Industry Association New Zealand (TIA), says the Border Clearance Levy introduced in the May Budget will be a handbrake on growing the visitor economy.
If it is to be imposed, the design, timing and implementation of the Travel Tax needs significant amendment, CATT says in its submission on the tax.
“The introduction of this tax shows a focus on balancing the Crown books rather than supporting one of the country’s biggest export earners to grow further,” TIA Chief Executive and CATT spokesperson Chris Roberts says.
“The tax was put together in haste immediately before the May Budget with very limited analysis and no consultation.
“It ignores a long-standing understanding in New Zealand that border services are a public good and should therefore be funded from general taxation.”
Mr Roberts says the Government has downplayed the potential negative impacts of the tax.
However, information released to CATT under the Official Information Act shows that an independent analysis commissioned by the Government estimated the Travel Tax would reduce international visitor numbers by 1.4% and cut their expenditure by 0.9%. This equates to a loss of 44,000 visitors a year and spending of $104 million.
Further analysis from the international airline and cruise industries suggests this may underestimate the impact.
New Zealanders will make up almost half of the travellers required to pay the Travel Tax. Outbound passengers are 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.
“Substantive analysis still needs to be undertaken into the justification for the tax, what costs are to be recovered and what the potential impacts may be. The introduction of the Travel Tax must be delayed until 1 January 2017 to allow this to take place.”
CATT says a significant proportion of the funding of Ministry for Primary Industries and New Zealand Customs border services should remain Crown-funded.
“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. More work needs to be done to decide the appropriate split, further supporting the need for delay.”
CATT is calling for the Travel Tax to be zero-rated for GST, to avoid a tax on a tax. It also wants the establishment of a traveller reference group that is tasked with monitoring how the funds collected from the Travel Tax are allocated each year.
Mr Roberts says the Government should engage with the sector to properly understand the potential impact of the tax.
“CATT members are ready, willing and able to provide beneficial input to this impact analysis.”
The Government has highlighted that the proposed cost per traveller is less than the Passenger Movement Charge (PMC) in Australia. However, benchmarking with other countries cannot be done without a proper understanding of the respective costs covered.
“A small bad tax is still a bad tax. It is an unwelcome signal being sent by Government – that it is willing to impose risks on efforts to grow the value of the visitor economy, contrary to the goals of its own Business Growth Agenda.”
To read the CATT submission, visit www.tianz.org.nz/main/policy-issues/