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New Zealand: to tax or not to tax?

O'Connor floats tourist tax to fund industry  Aug 04, 2008

Funding has finally been approved for the Government's much talked about tourism strategy but the difficulty in getting it passed has highlighted key financing issues for the industry.

Yesterday Tourism Minister Damien O'Connor announced that Tourism Strategy 2015 had received the Cabinet's seal of approval and would receive $2.83 million in the next year on top of the $1.6 million already put aside for the project annually.

The draft proposal was completed at the end of last year and had been with the minister since April. Many businesses at the industry's annual trade show in May feared it had been put on hold because of funding issues as no new money was allocated to it in this year's Budget.

Yesterday O'Connor was almost apologetic in pronouncing the amount the strategy would receive: "I am well aware that to achieve our goals we need more funding."

But he was also quick to come back with an alternative. In his first open statement to the industry he talked of plans to introduce a tax on tourists.

"We need to find a mechanism to link tourism's performance with its funding. That's why I have raised the concept of a charge on arrivals."

O'Connor has been in behind the scenes talks with the industry about this for several months, including bringing the issue to the Tourism Industry Association's annual board meeting at the end of May.

Tourism contributes $20 billion a year to the economy and is New Zealand's biggest export earner. But in the past eight years it has received little in the way of additional funding from the Government to market itself internationally.

O'Connor said the issue of how much GST the Government earned was regularly raised with him as people questioned why tourism could not get back in funding what it brought into New Zealand.

He said transport was the only area to receive allocated funding specifically from taxes raised and the Government had looked at this method for other areas but decided alternatives could work better.

He envisaged the charge would be between $10 and $15 a tourist and was likely to be included in the price of the airline ticket rather than having to be paid at the airport.

But exactly who the charge would apply to or the timeframe for its introduction is still up in the air.

However, it would not apply to New Zealanders returning from holiday.

O'Connor said the Government would not pursue the idea without support from the industry first.

So far, he said, reaction had been cautious.

New association chief executive Tim Cossar was not giving anything away and said the body was open to all ideas and had not made a decision at this stage.

"We are open for discussion - there are lots of different opinions as an industry we have to explore a number of ways and new options."

Meanwhile, National deputy leader Bill English - who also spoke at the conference - took the opportunity to criticise the strategy.

"I have read the document but it makes no mention of the word profit. I think we are meant to believe making a profit is about ripping people off. But if you don't make money you can't reinvest in your business.

"Don't fall for the word sustainability - what the hell does that mean? You've got to make money if you're going to stay in business."

He said that if National was elected it would be open to discussion on the tourism budget, although he did not promise any more funding.

O'Connor floats tourist tax to fund industry
Tourism Minister Damien O'Connor /

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