FLIGHT RISK
Why your holiday might cost more
Airlines fear a planned new tax on tourists will load costs on them, force up ticket prices for all passengers and could lead to some carriers dropping certain routes, or no longer flying to New Zealand.
The Government is close to finalising its plan for the tax, which it says will fund tourism infrastructure and will be introduced within the next 12 months.
While no details have been made public, airlines and the tourism industry believe it could provide exclusions for some nationalities, possibly Australians and people from the Pacific Islands. They say that would make the tax even more difficult and costly to collect.
Already, taxes and other charges make up more than half the cost of a bargain economy fare across the Tasman. The Board of Airline Representatives (Barnz) says its members would have to set up costly IT systems to collect the new tax, and that cost would be passed on to all passengers.
Some marginal international routes could become difficult to sustain for airlines already grappling with soaring fuel costs. The price of fuel is up 54 per cent in the past year and that has already led to fare increases, including Air New Zealand’s 5 per cent hike on domestic tickets.
It has been suggested the tax could be $25 a head, which a global airline body says could result in 78,000 fewer visitors a year and cost the country $100 million.
“There are some strong headwinds coming where the days of having cheaper airline tickets are going to be numbered,” said Barnz executive director Justin TigheUmbers.
“Airlines are fed up with being a tax collection agent. It’s blatantly unfair to ask them to collect another tax.”
His organisation represents 29 airlines operating here. The airlines say their systems are not set up to collect charges that have exceptions.
“That would involve having the right information around passengers’ residency, what the purpose of the visit is, which market segment they’re in or what other way the Government is wanting to differentiate,” said Tighe-Umbers.
“Really it’s death by 1000 cuts — the more you add on these incremental costs, the greater the hit you’re going to take on demand.” He said the Government should look at other ways of raising more revenue from visitors, who already pay about $1.6 billion annually in GST.
“Let’s get them in the door and spending first, rather than making it more expensive to get here.”
The Government should investigate more targeted, user-pays ways of funding infrastructure, such as charging tourists to visit National Parks or a nationwide bed tax.
“What we’re saying is let’s just sit down and consult with us and the wider tourist industry on something that’s not going to hurt the golden goose that’s laying the $14.5b egg.”
Tourism Minister Kelvin Davis said he was still working on the details and would release more information on the “international visitor levy” in the coming weeks.
“There is a lot to consider and we want to make sure we get this right. We will be consulting with industry and the public before making any final decisions on the details of the levy and how it will be distributed.”
The Minister said it was the “first step” to a more financially sustainable model that would ensure international visitors were contributing to the infrastructure they used and preserving the natural environment.
The International Air Transport Association, which made the $100m estimate of the levy’s impact, has written to Davis outlining its objections.
And Tighe-Umbers said there was also pressure to put up biosecurity and aviation security charges, which are all funded by airline passengers.
“In the worst case, increasing costs can see airlines redeploy flights to lower cost routes, and that is the risk we face in New Zealand, particularly with our dependency on long-haul flights.”
The sudden imposition two years ago of a border tax of up to $22 for security and biosecurity did not dent tourism as feared, but he said that was at a time of soaring demand for New Zealand and less cost pressure on airlines. Tourism growth, which has levelled off since then, could have been higher without that tax, he said.
Tourism Industry Aotearoa chief executive Chris Roberts said international visitors were not freeloading and were paying their way.
“The single biggest beneficiary of the tourism boom is the Government through the tax take so it is worth having a conversation about how to help conservation and local government to help meet the costs they’re bearing.”
Roberts said the tourism industry wanted to know more about the design of the tax and how it could be implemented efficiently, and was also very interested in who controlled the funds and decided where they were spent.
A differential tax for some nationalities or types of visitors was rare for any country and would be a challenge to collect. It could be “a booth at the airport — that’s not very modern or progressive”.