Proposed Visitor Levy

The following summarises details of the proposed visitor levy QLDC will present to government:

• A 5% charge applied to the costs of accommodation payable by visitors. For example, $12.50 (plus GST) on a $250 per night hotel room, or $2.00 (plus GST) on a $40 per night backpackers.
• Applicable to all short-term (four weeks or less) accommodation based on occupancy (e.g. the cost of the room per night, not the number of people staying) within the Queenstown Lakes District.
• Paid by visitors in addition to their accommodation fee, not by accommodation providers from their room charges. Additional charges such as minibars, breakfast, car parking, laundry would NOT be levied
• Not applicable to freedom campers in the district. However we are keenly aware of the community’s concerns that these visitors should make a contribution and are investigating models to apply to freedom campers.
• We don’t anticipate a levy of 5% on top of the accommodation cost would have a significant effect on the majority of people choosing to visit and stay in the district – it’s not an unusual model and doesn’t deter people from visiting international destinations such as Whistler or Aspen.
• Accommodation providers currently pay a differential rate which is inadequate to collect the scale of revenue needed to fund the district’s infrastructure and services. If the levy is implemented the current differential rate will be reviewed to ensure that accommodation providers are not paying for costs to be funded by the new levy. This will ensure that the additional funding needed is collected from visitors, and it is likely this will lead to a reduction in the rates accommodation providers pay.

The following represents the Council’s work in validating the need for, and value of, the proposed levy and how it could be potentially invested. Final numbers and design of the model would be developed in partnership with central government.

• We have analysed the expenditure within the Council’s 2018-28 Ten Year Plan to determine the amount of visitor-related costs which we can potentially recover from the levy.
• The total amount of visitor related expenditure over ten years which could be funded from the levy is $373.7M, with $175.6M for capital and $198.1M for operating costs (13.4% of total expenditure over ten years; see pie charts below).
• We have estimated the total annual turnover of all accommodation providers in the district to be $450M. This will form the base for the levy.
• A levy rate just over 8% would be needed to recover all of the $373.3M visitor related costs. This could allow for significant rate reductions over time as the levy would recover costs which are currently recovered through targeted rates.
• The proposed levy would provide a new capital revenue source which will effectively reduce the Council’s projected debt by approximately 39%. This would reduce interest costs and provide greater flexibility for the Council to deliver projects currently unachievable because of financing constraints. This is the reason why any levy revenue should be applied to capital projects as the first priority.

The following outlines our proposal for how the levy could be collected and would form part of our proposal to central government. The exact mechanism and precise details would be subject to further input from government agencies.

• We are in discussion around collecting the levy in the same way that GST is charged, as a clear below the line charge. It will not be hidden in any room rate, and will clearly exist as a local charge.
• Peer-to-peer online platforms, such as Airbnb, would collect the payment directly from the visitor at the time of booking. If you provide accommodation through an online peer-to-peer platform that doesn’t collect the levy it will be your responsibility to collect the levy and pay it to the central collection agency.
• If implemented, we anticipate the levy would be in place for the 2021-2031 Ten Year Plan giving time to put collection systems in place.
• It is our strong preference that the levy is collected by a central government agency. This will provide confidence to the local community that robust collection systems are used and that privacy is maintained for the businesses affected. The Council would be involved in an auditing role to ensure that the levy is charged and collected appropriately.
• Council is prepared to implement a local collection system if necessary, but this option is not preferred as there are clear cost efficiencies to be gained if the levy is collected by a central government agency.

If implemented, the levy would be in place for the 2021-2031 Ten Year Plan. We expect revenue from the proposed levy would be applied to both capital and operational costs as outlined that can be identified as being used by, in whole or in part, visitors to the district. This would include investing in infrastructure and services under additional pressure due to visitor activity such as roading, wastewater and water supply, waste disposal, public toilets and our town centres. All direct expenditure of this type would be assessed and apportioned between residents and visitors, based on a mix of average and peak day ratios between residents and visitors. 

• The levy wouldn’t be applied to expenditure primarily benefitting local residents, or activities currently funded through grants and subsidies, user charges or development contributions.
• The Council Revenue and Financing Policy would need to be amended to include the proposed visitor levy as a new revenue source and highlighting which specific Council activities will benefit from the levy and how rates will be affected.
• It is proposed that all levy revenue will be separately accounted for via a new operating reserve which will clearly demonstrate all annual levy income received and all funding entries going out.
• In order to be prudent, it is also proposed that any funding of operating expenditure be done in arrears. This mitigates the risk of Council relying on a new variable income stream which may not recover as much as estimated. This means that any potential rates reductions will not occur until year two of the levy and will be based on a known levy amount collected in year one.

The additional revenue from the proposed levy would also enable the Council to either invest in projects that were deferred from the Ten Year Plan, accelerate projects already in the plan, and/or divert loan funding into alternative projects, all of which enable existing funding to be redirected into projects that directly benefit the local community.  These options would increase the capacity to deliver services to both our local and visiting communities alike.