The NZCA's submission on the International Visitor Conservation and Tourism Levy

Submission date:  22 July 2018
Submitted to:  Ministry of Business, Innovation and Employment

Proposed Introduction of International Visitor Conservation and Tourism Levy

1.1 Are there other costs and benefits derived from international visitors to New Zealand? 

There are significant costs and benefits deriving from international visitors to New Zealand. Costs arise from the impact they have on the infrastructure – e.g. roads, facilities at place, provision of water, removal of rubbish – which are most keenly felt by smaller regional communities and councils; and on the biodiversity and natural environment that has drawn them to New Zealand in the first place. Overcrowding at key sites, such as the Tongariro Alpine Crossing, Aoraki Mount Cook, Punakaiki, Fox and Franz Glaciers, and Milford Sound, require significant investments in car parking, toilets etc to cope with the ever growing numbers. The benefits derived from international visitors are reflected in the increasing contribution tourism is making to our GDP (40% of export growth in the next 5 years will come from international visitor spend) – through direct costs and the GST take.

1.2 What are your views on current funding arrangements for tourism infrastructure and conservation i.e. what are the constraints? How could users more effectively contribute to the costs they impose?

Current funding arrangements are heavily constrained. Central and local government are not able to expand the infrastructure requirements fast enough to meet the needs of the increasing visitor numbers. For many territorial authorities, especially those with low populations and, therefore, rating base, investment is unaffordable and rate increases cannot match the demand. Even a council such as Queenstown Lakes District Council is struggling to meet the growth of Queenstown and neighbouring communities. Equally, the Department of Conservation, which manages approximately 1/3 of NZ on behalf of its citizens, struggles to meet the tourism demands on conservation land while also managing to protect the biodiversity and natural environment (particularly the national parks) that tourists are coming to visit.

1.3 Are there other costs and benefits of the IVL as a funding tool in relation to the funding issues above?

We support the introduction of the IVL as the easiest and fairest mechanism by which to levy international visitors to NZ.

1.4 Do you agree with the criteria for a sustainable funding package?

Yes.  The IVL offers a scale of investment that would help smaller communities and territorial authorities better develop their infrastructure. It enables a fairer distribution of revenue, and it is a simple cost-effective means of collecting the revenue.

1.5 Do you agree that an IVL is a useful component of such a package?

Yes.

1.6 What are other funding tools which ensure that people who use and enjoy infrastructure make a contribution to the costs?

Another mechanism to ensure that costs on the use of infrastructure are better distributed, could be for the funds raised through the IVL to be matched dollar for dollar by the GST raised from those visitors. Currently GST revenue passes straight to the Crown for investment in large-scale infrastructure (e.g. hospitals, roads etc), but a small percentage could go back into the IVL revenue to increase that for communities and conservation.

1.7 Do you have any comments on the potential cumulative impacts of the fee and levies, Electronic Travel Authority and IVL proposals under consultation on visitors or your industry?

There is always a danger that cumulative fees will be seen as an impediment to international visitors, especially if the number of fees/levies continues to grow. The counter-argument is that the total cost of the fees is a small percentage of the costs visitors bear to arrive in NZ in the first place.

2.1 Do you support the Government’s proposed targeting mechanism?

Yes.  In part. The Australian tourism sector is New Zealand’s largest market – there must be some mechanism that enables the Government to introduce a fee that can be changed to 40% of our incoming visitors. One mechanism could be a differential charge - $15 for adult Australians and Pacific nations and $35 for the rest of the world. We acknowledge, however, that this would be very complicated to implement.

2.2 Are there other costs and benefits of exempting certain groups of travellers we should consider (e.g. Australians and Pacific Island visitors, crew travelling on aircraft and ships)?

Under the current proposal Australians will not be levied, because of bilateral agreements that see Australian citizens and residents treated as NZ residents the minute they set foot on our soil.

We believe Australians should not be exempt despite challenges of levy collection from them – they constitute 1/3 of international visitors, have wide range of pricing sensitivity and, if not charged it means both NZ tax/rate payers and other international visitors charged IVL are effectively subsidising them in terms of offsetting costs.

New Zealanders place the greatest pressure on nature so shouldn’t they pay too? New Zealanders arriving at the border could also be levied in the same way as visitors.

2.3 Are there other classes of visitor that should be exempted from the IVL?

No.

3.1 Are there other things that should be considered when selecting the collection mechanism? How might these support or alter the preferred approach?

In our opinion, the proposed mechanism for collecting the levy is the simplest and fairest, but we note that the industry has proposed a fairer and more substantive model for raising revenue for conservation and tourism infrastructure.

3.2 Are there other costs and benefits for the proposed mechanism, or alternatives?

-

3.3 If the Government does not proceed with an ETA, would you support collection of an IVL by another means, or in a different form?

The levy should be collected via visa fees and the proposed Electronic Travel Authority process for visa waiver countries. Thus you can’t travel to NZ unless you have either a visa or an ETA (similar to the US and Canada) – there is no way anyone can turn up on the border and suddenly be required to pay a levy. They would have to have paid it via their visa or ETA before they get on the plane. However, it potentially needs a much longer lead time to implement – in Canada’s case they spent two years telling potential visitors that they had introduced an ESTA, and for months after implementation they still had thousands turning up not knowing about it and having to pay at the border.

4.1 What are the impacts of different rates likely to be?

This has both positive and negative implications: set the levy too low and not enough revenue will be generated to provide the additional support intended. Set it too high and you run the risk of slowing the number of incoming visitors as NZ becomes seen/known as an expensive destination, which it already is to some extent. The other risk is that charging visitors from EU countries, such as the UK and Germany, and not Australians, will be seen as discriminatory.

4.2 Do you have a preferred rate?

We believe the levy charged per person should be more than $35 due to the level of investment needed for providing tourism infrastructure/services and in regard to conservation/biodiversity needs. Tourism is a business and NZ is a high quality destination offering a world renowned mostly nature based experience and as such we shouldn’t be afraid to charge – i.e. we should ‘walk the talk’ in targeting “high quality visitors” – suggest $45 or $49 per visitor.

5.1 What should be the funding share between tourism infrastructure and conservation? Why?

We support the proposed 50:50 spilt between tourism infrastructure and conservation.

The 50% ear-marked for infrastructure should, in the first instance, be going to those territorial authorities with a small rating base and large number of tourists. It is these small communities which are struggling to provide the necessary infrastructure. They need the capital in the first instance, as well as those regions where there are high nature-based tourism visitor flows, a small population /rating base and clear national conservation priorities.

In that respect the criteria for allocating that money should in the short term address that issue. It should also give consideration to the fact that provision of capital for building facilities is one aspect of local authority costs. There will be ongoing annual maintenance and operational costs. I think the criteria should make provision for some funding of those expenses also for local authorities with small rating bases.

Once some of these issues are sorted, then the criteria can be reviewed and the tourism 50% allocated more widely. The criteria need to be reviewed every 2-3 years, as progress is made. This will require some reporting back on the part of those receiving the money – a good transparency and accountability measure.

A potential breakdown could be as follows:

• Projects with high priority allocation:
  • local infrastructure/amenities – toilets, water schemes (drinking water), rubbish collection, parking areas, tracks etc in communities with high visitor numbers/low rating bases struggling to cope with rapid tourism growth – in these areas ratepayers unable to subsidize such investment in new infrastructure and ongoing servicing/maintenance costs
  • Conservation and biodiversity activity (DOC)
  • Conservation visitor infrastructure and facilities (DOC)
• Projects with medium priority (i.e. fund once catch up expenditure needed above has been addressed):
  • Largescale strategic investments in emerging regions with good tourism potential
• Low priority for expenditure:
  • Support for tourism businesses
  • Support for systems change investigations

With respect to the DOC 50% share of the levy, the funding should be directed towards biodiversity but it is nowhere near enough to make the difference that needs to be made in the short and medium term.

5.2 How would you define tourism infrastructure and conservation for the purposes of spending the IVL? For example, do you support using IVL revenue to:

a)  Fund basic infrastructure used by visitors and/or residents?

Yes.

b)  Develop visitor attractions?

No, it should not be for new capital investment, it should be to provide new infrastructure for existing visitor attractions

c)  Support conservation and bio biodiversity activity such as predator eradication, breeding programmes, native planting?

Yes.  Visitors are being told that the Levy is to maintain the high-quality NZ natural environment in the face of growing visitor pressures. Therefore, the money should not just be used for tourism facilities (toilets, parking, tracks) but also for maintaining the natural attractions that visitors are coming to see. Hence restoration of threatened and endangered species through effective pest control and breeding programmes, protecting and enhancing water quality and the control of weeds (e.g. wilding pines) that threaten iconic landscapes such as the Mackenzie Basin all qualify for support.

d)  Protect the values of our wild places/iconic destinations including national parks and world heritage areas?

Yes.

e)  What else could the IVL revenue be spent on?

-

5.3 How should the tourism sector, local government, and/or other stakeholders inform the decision-making process?

-