Councillors opt for bed tax report

Proposal raises cost issue without mentioning benefits tourists bring


Published 16 August 2002


Bed tax – anathema to the tourism industry – was on the agenda of Auckland City Council’s finance & corporate business committee today, and didn’t go away like it should have. [I didn’t attend the meeting.] Instead, the committee decided “to explore a range of additional funding options, including some form of levy on visitors to Auckland City,” chairman Doug Armstrong said after the meeting.



Believing that tourists & business visitors don’t pay their way already – don’t contribute their share for increasing the need for infrastructure such as sewers, water mains, a public transport network – is the same as the spurious claim that people who rent houses don’t contribute to rates.


Immigrant influx puts pressure on infrastructure — and justifies some services that couldn’t otherwise exist


The prospect of a bed tax has resurfaced at the same time as immigration numbers have reached record levels.


Businesses like immigration because it brings extra money into the economy, and increases demand for products like houses. Councils like immigration because it takes populations closer to the mythical god “critical mass,” helping to justify services like a public transport network which wouldn’t be justifiable if the population was static.


2 million foreign visitors staying an average 20 days each would equate to a determinedly consuming extra 100,000 permanent residents. The one excuse for taxing them locally might be that the taxes they already pay, through their consumption, are not filtered back down from central government.


At the same time, the non-tax portion of that consumption goes directly into the local economy, and so makes its way into the rate take. Labour councillor Richard Northey introduced the recommendation that the council’s finance director “investigate the merits of, opportunities for, & legal restrictions on the possibility of introducing an appropriate form of visitor accommodation levy for Auckland City.”


Northey wants tax ready for next council budget


He wanted the levy investigation completed in time for a bed tax to be considered as part of the next annual plan direction-setting process.


Cllr Armstrong said the bed tax, either on occupied beds or on all visitor accommodation, was mooted as one means of resourcing infrastructure, services & promotional costs associated with visitors to the city. He said the committee decided council officers should prepare a scoping paper, “setting out a range of options for raising additional revenue for investment in essential infrastructure & services.” And he said the council would “be looking at ways of resourcing proposed major new initiatives like the convention centre.”


However, he said it was important for the council to view any proposals, such as the bed tax, within the context of the wider ratings system and to carefully consider the implications of any proposed changes on specific groups of ratepayers.


Capital fund is for big-ticket items


Sale of the council’s stake in Auckland International Airport Ltd, plus contributions from selling council housing, has been designated for a capital fund to be set up by the council, which would become debt-free as a result of this large cash influx.


A report on the capital fund, being prepared for the finance & corporate business committee to consider next month, will set out proposed rules governing application of the fund, the investment strategy & management of the assets.


Additional high-priority community assets,” as the February paper on the capital fund described its purpose, would come from the fund’s earnings and would include major items such as the proposed convention centre. Profits from a bed tax could be fed into this capital fund. But in competition for convention business, the local tax would also become a disposable negotiating point.


Bed tax almost arrived last year


Cllr Northey said in his report promoting the tax that it almost made it into law last year through the new Rating Act which comes into force on 1 July 2003. Accommodation industry pressure kept it out. But Cllr Northey said Local Government NZ had advice that definitions in the new act would probably be liberal enough to allow the tax to be introduced.


 


Because the Local Government Bill was held over to the new Parliament, Cllr Northey said rating laws could be amended through that. The Prime Minister undertook at the local government conference on 30 July to investigate new & enhanced funding powers for local government. Thirdly, Mr Northey said, Queenstown began a national campaign last month to be able to introduce a visitor or accommodation levy.


 


“Other cities charge it”


 


“Auckland City is one of New Zealand’s local authorities which has a very substantial part of its infrastructure, service provision, & promotional costs generated by visitors to its district.


 


“Most Pacific Rim cities with which Auckland is competing for visitors, for example in Japan & North America, routinely charge substantial bed taxes without any measurable negative effects on tourist & visitor numbers.


 


“Auckland has the opportunity to advocate for, and quite possibly already has, the power to implement a visitor levy. There is a strong case for pursuing this opportunity at this time,” Cllr Northey said.



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