New Zealand set to become more expensive to visit as it triples tourist tax

New Zealand plans to nearly triple the tax it levies on international tourists in a move that the government hopes will boost economic growth and support conservation.

The government says the hike will fund conservation efforts and improve visitor experiences. ​​The levy is used to maintain public services that tourists use during their stay in New Zealand and to support tourism sites.

The government is all set to increase the International Visitor Conservation and Tourism Levy (IVL) from NZ$35 (about £16) to NZ$100 (about £47) starting on 1 October. The IVL was introduced in 2019 to ensure tourists help cover the costs associated with tourism in New Zealand.

Tourism and hospitality minister Matt Doocey said that “the government is serious about enabling the tourism sector to grow as part of our overall goal of doubling exports in 10 years”.

He stated that the government consulted citizens on the increase and found that 93 per cent of respondents supported raising the IVL, with many agreeing that an increase was reasonable to help cover tourism costs.

“International tourism plays a hugely important role in the New Zealand economy, with international visitors spending over $11bn in the year ending March 2024,” he said.

“But international tourism also comes with costs to local communities, including additional pressure on regional infrastructure and higher upkeep and maintenance costs across our conservation estate.”

Mr Doocey stated that raising the IVL to NZ$100 would likely have little impact on visitor numbers.

“A $100 IVL would generally make up less than three per cent of the total spending for an international visitor while in New Zealand,” Mr Doocey said.

“Increasing the IVL means we can continue to grow international tourism to support economic growth while ensuring international visitors contribute to high-value conservation areas and projects, such as supporting biodiversity in national parks and other highly visited areas and improving visitor experiences on public conservation land.”

However, the tourism industry fears it will make New Zealand more expensive and less competitive, especially given a recent increase in visitor visa fees.

The International Air Transport Association (IATA) expressed disappointment with the government’s decision to increase the IVL. “It has been a double whammy for the New Zealand travel and tourism sector, starting with New Zealand Immigration announcing steep increases in visa fees, and now the increase in the IVL,” Dr Xie Xingquan, IATA’s regional vice-president for North Asia and Asia-Pacific (ad interim) said in a statement.

“These changes make travel to New Zealand more expensive and less attractive and could further delay the recovery in visitor numbers to beyond 2026,” he said.

The recovery of New Zealand’s aviation market is reportedly currently trailing behind major markets like Australia, Canada, France, Spain, the UK, and the US, which have either returned to pre-pandemic passenger levels or are expected to fully recover in 2024.

The move to hike international tourist tax comes amid New Zealand’s high cost of living crisis. Increasing costs for housing, groceries, and utilities are creating a financial strain for both residents and visitors of New Zealand.

Recently released government statistics reveal that record numbers of people are leaving the country due to rising unemployment, high interest rates, and sluggish economic growth. Data from Statistics New Zealand, released last month, indicated that 131,200 people left the country in the year ending June 2024 – provisionally the highest on record for an annual period. Approximately one-third of these departures were to Australia.

“The travel and tourism sector is an important contributor to the New Zealand economy. The government’s analysis indicated that more than three times of economic activity will be removed from the country for every dollar generated from additional IVL revenue,” Dr Xie said.

“Instead of stifling its development, the government should be looking at ways to improve the country’s competitiveness as a destination compared to other markets.”

He cited the example of Thailand which abandoned its plans for a tourism tax on air travellers in June to boost tourist spending in other areas.

Rebecca Ingram, chief executive of Tourism Industry Aotearoa (TIA), said the move was disappointing and would “dent our global competitiveness”.

“So far, we’ve received no signal from the government on its investment plan for the increase in funds from the levy. We need transparent, meaningful spend that makes New Zealand better and ensures our tourism offering is world-class.

“Visitor expectations will be significant, we invite the government to work with industry on a plan for how the money is spent to improve the visitor experience and solve problems.”

The Board of Airline Representatives (Barnz) was also “extremely concerned” about the hike and said that the decision showed the government didn’t “appreciate the impact of softening demand for destination New Zealand”.

“Airlines know that the outlook for inbound tourism to New Zealand is soft,” executive director Cath O’Brien.

“As we look ahead to what should be New Zealand’s peak season, we see just 2 per cent growth of air services to New Zealand’s international airports year on year. New Zealand’s aviation recovery is now the laggard of the Asia Pacific Region.”

Meanwhile, not everyone entering New Zealand is required to pay the levy. Exemptions apply to travellers with Australian or New Zealand passports, passports from many Pacific Island nations, transit passengers, and holders of New Zealand or Australian resident visas.