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NZ Productivity Commission drops proposed bed tax

New Zealand will not proceed with a proposed bed tax.

Tourism Industry Aotearoa says it is delighted the formerly proposed “bed tax” no longer has the support of the New Zealand Productivity Commission, according to the Local Government Funding and Financing report.

In a reversal of its position from earlier this year, the Productivity Commission changed its view to now align with TIA’s view that international visitors were already paying their way and that local councils should better use the resources already available to them to fund tourism infrastructure in their communities.

The Commission’s report, tabled in Parliament today, said councils had a wide range of funding options available to them including user-pays systems, rates and debt funding, as well as central government support which could be capitalised upon through better planning in areas where tourism is likely to be higher or more popular. In all, the report contained eight findings and four recommendations.

Following engagement with the Commission, TIA Chief Executive Chris Roberts said he had managed to sway the Commission’s view through better understanding of “how the visitor economy works”.

“Bed taxes would miss the majority of travellers and add costs to a small set of operators already struggling with increased business and compliance costs, at a time when tourism is slowing,” Roberts said.

TIANZ Chief Executive, Chris Roberts.

The Commission also noted that standalone homes rented out through the sharing economy on platforms such as Airbnb should pay business rates or a proportion thereof if said home was operating as an accommodation business most of the year.

“Better use of existing tools and central government funding should be enough to address tourism funding,” Roberts added.

“Given the small scale of the funding gap, introducing new tools would incur significant implementation, administration and enforcement costs and is unlikely to result in a net benefit to councils.”

The proposed new bed tax, had it gone ahead, would have been collected as part of hotel room rates and would have operated in tandem with New Zealand’s existing Visitor Levy which took effect earlier this year and sees all arrivals pay NZ$35 per person as part of their airfare or cruise fare.

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