Levy on rooms now unlikely

The Government has decided against giving local councils the power to levy a "room tax" on hotels and motels, after warnings the move would have stymied tourism growth.

Parliament's local government and environment select committee had inserted a clause in the Local Government (Rating) Bill giving councils the power to impose the levy based on room numbers, regardless of occupancy.

But Local Government Minister Sandra Lee and Tourism Minister Mark Burton said yesterday that they were not convinced of the merits of the proposal and would seek to remove it when the bill returned to Parliament.

"The bill does give local authorities greater rating flexibility, but the added clause targeting the accommodation sector is the only industry-specific one - and that is simply not equitable," Ms Lee said.

Mr Burton said the room tax would be "a serious barrier to future tourism development" and he hoped all parties would support the clause being scrapped, despite the select committee's recommendation.

The ministers' proposal was welcomed by Tourism Industry Association chief executive John Moriarty.

"The proposed room tax rate included in the draft bill concerned us greatly ... Such a rate could have put hotels and motels all over the country out of business."

Business New Zealand chief executive Simon Carlaw also welcomed the Government's stance but said there were other difficulties with both the Local Government Bill and the Local Government (Rating) Bill that were "also crying out for a sensible and pragmatic response".

Mr Carlaw said the two bills promoted changes in policy direction that would make local bodies less accountable and less efficient, would cause rates to rise, and would disadvantage small businesses.

Among Business NZ's concerns were that under the new legislation councils would be given broader powers to engage in activities better carried out by the private sector or the Government.

Mr Carlaw said the lobby group was also concerned that the changes would make it easier for councils to strike rates differentials, putting a greater cost on small business, and would discourage outsourcing, leading to fewer opportunities for small local businesses.