A conversation worth having

December 2018

Finding new funds for tourism infrastructure seems to be controversial, but it’s still a conversation we need to have.

Nothing illustrates this better than two separate articles in the Mercury this week: in one, I am criticised for raising the issue of a levy to help local governments fund infrastructure for our visitors. Over the page, we read about a stalemate over maintenance of the Wielangta Rd tourist drive, which the Sorell Council says it cannot afford to restore.

Tourism levies are not part of an anti-tourism agenda. On the contrary, the idea is about recognising the importance of visitors to our economy by working out how best to fund the infrastructure and services to maintain a good experience.

Many cities and countries around the world are implementing mechanisms to raise the additional funds needed to be a sustainable and successful tourist destinations.

The City of Edinburgh Council is lobbying the Scottish Government to introduce a “Transient Visitor Levy”, which they argue “is in the best interests of our residents, our tourism industry and ultimately also those who visit us.”

In a detailed study from May 2018 the Edinburgh Council concluded that, “with tourism and the number of residents in the city both projected to continue to grow, and in an environment where public spending continues to shrink across the piece, we need to consider more sustainable ways of securing long term investment that are fair and balance the interests of all. To make progress on this issue it is essential that we have an open and balanced discussion with those who would be affected by it.”

The New Zealand Tourism Minister recently introduced a new levy on overseas visitors that he said will raise $80 million to help “protect the things that make New Zealand special.”

In launching it, he pointed out that “for too long we have been trying to get more and more visitors and marketing ourselves as a destination, instead of ‘managing’ ourselves as a destination.” 

Interestingly, the tourism industry in New Zealand is now pushing to have a say in how the money is spent on the ground, rather than opposing to idea outright.

Knee-jerk reactions against new policy ideas is good for headlines, but I encourage all Tasmanian decision-makers to be evidence-based decision-makers.

Contrary to the rhetoric, we don’t know that a visitor levy would create any negative impact on jobs or businesses. The claim is easy to make, but what is the evidence from cities, regions and countries that have implemented these funding mechanisms? Isn’t it worth at least finding out?

There is little evidence to suggest that mechanisms such as small visitor levies impact negatively on visitor numbers. Visitor demand is influenced by a complex mix of factors including the destinations overall appeal; relative and overall prices; and the overall quality of the tourist experience, cultural and other attractions.

Studies suggest a major factor in changing demand for travel to destinations internationally is large fluctuations in exchange rates.

I have made it clear that I am not advocating for a ‘bed tax’ in Hobart. It is clear that poorly designed funding mechanisms add to the burden of some businesses to collect and pass on any levy. Smart cities and tourism industries can however work through policy design ‘mechanics’ to avoid these issues.

With the expansion of tourism already challenging the capacity of local infrastructure and services, the choice we have for the future is between additional state and federal government funding, or a small levy collected via the visitor economy in some way. A third option, unlikely to be supported by the community, would be increasing costs for ratepayers.

The chance of extra taxation revenue being passed from state and federal governments to local Councils also looks unlikely.

Federal Assistance Grants for local government have declined every year since the 1970s. A freeze in the increase of these grants between 2014 and 2017 set local governments back by hundreds of millions of dollars.

With less tax revenue ‘trickling down’ from federal and state government to local Councils, all we are left with rates. In 2017 the Productivity Commission found that “local governments’ only tax base, property rates, accounts for approximately 3.5% of Australia’s total tax revenue.” Yet at the same time, the community’s expectation for great footpaths, toilets, parks, pools and sporting facilities continues to increase.

It would be a good start for the State Government to initiate a specific Tasmanian study of options that could be considered for our state. We owe is to our community, our visitors and our future to at least consider fresh policy approaches and ideas to manage this significant aspect of our economic growth.