Tax­ing tourists

The Northland Age - - Local Life / Opinion - Danielle van Dalen

I’m no econ­o­mist, but even I know that ba­sic eco­nomic the­ory says that as the price of a prod­uct in­creases, de­mand for that prod­uct will de­crease. Ge­of­fery Crouch, of the Univer­sity of Cal­gary, how­ever, claims that there is an ex­cep­tion to this rule, and when a price in­crease has a pos­i­tive im­pact on the prod­uct it can change our pat­tern of be­hav­iour, so peo­ple will con­tinue to pur­chase it.

This ex­cep­tion is use­ful for un­der­stand­ing the tourist tax an­nounced by Con­ser­va­tion Min­is­ter Eu­ge­nie Sage.

In Oc­to­ber, the gov­ern­ment will be­gin a seven-month trial of tax­ing tourists for us­ing our beau­ti­ful walk­ing tracks. That is, tourists will be charged more than New Zealan­ders when ex­plor­ing the Mil­ford track, Ke­pler, Route­burn, or Abel Tas­man Coastal Walk.

Pre­vi­ous dis­cus­sions around tourist taxes led to fears that, as ba­sic eco­nomic the­ory pre­dicts, in­creased prices would sim­ply de­ter tourists from vis­it­ing New Zealand. In fact, ear­lier this year, Tourism In­dus­try Aotearoa chief ex­ec­u­tive Chris Roberts pointed out that tourists are “al­ready be­ing taxed quite heav­ily,” both through GST and their bor­der clear­ance levy. Last year, when the pre­vi­ous gov­ern­ment con­sid­ered a tourist tax, for­mer Tourism Min­is­ter Paula Ben­nett, said New Zealand had a rep­u­ta­tion as a world-class des­ti­na­tion, and it was im­por­tant it was not per­ceived as be­ing un­af­ford­able.

How­ever, if we take into ac­count the idea that in­creased price can have a pos­i­tive “qual­ity sig­nalling” ef­fect on a prod­uct, and there­fore its con­sumer ap­peal, this tourist tax seems much more rea­son­able. Chris Roberts has also ac­knowl­edged that New Zealand doesn’t cur­rently have the in­fra­struc­ture to sup­port the num­ber of peo­ple vis­it­ing our shores. If we want to con­tinue to pro­mote our beau­ti­ful coun­try as a tourist des­ti­na­tion, we need to pro­tect it, and pro­vide suit­able in­fra­struc­ture to sup­port those peo­ple want­ing to visit it. This means pro­tect­ing our wildlife and na­tive plants, as well as the up­keep or build­ing of walk­ing tracks and huts. Ob­vi­ously, this comes at cost.

Dif­fer­ent so­lu­tions have been sug­gested over the years. A bor­der tax where peo­ple paid when peo­ple en­ter the coun­try was con­sid­ered un­der the pre­vi­ous gov­ern­ment, for ex­am­ple. Af­ter ex­plor­ing the idea more thor­oughly, how­ever, Trea­sury found this to be a “blunt tool,” and preferred more tar­geted taxes, which aren’t new ei­ther. Ex­am­ples can be found around the world. Venice and Brugge, as well as Cam­bo­dia’s Angkor Arche­o­log­i­cal Park, Har­ri­son’s Cave in the Caribbean and Peter­hof Palace in Rus­sia are just a few at­trac­tions where tourists pay more than lo­cals.

When con­sid­er­ing a tourist tax it’s im­por­tant to ask whether this will de­tract from our tourist in­dus­try. It seems to me that tri­alling a tar­geted tourist tax like this is an op­por­tu­nity, as the eco­nomic the­ory sug­gests, to im­prove and sus­tain our prod­uct (or great walks) so that both tourists and New Zealan­ders can con­tinue to en­joy them for many years to come.

"If we want to con­tinue to pro­mote our beau­ti­ful coun­try as a tourist des­ti­na­tion, we need to pro­tect it, and pro­vide suit­able in­fra­struc­ture to sup­port those peo­ple want­ing to visit it. "

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