KI Traveller's Levy Economic Impact Assessment - Kangaroo Island ...

Commercial-in-Confidence
KI Traveller’s Levy
Impact Assessment
6. SUMMARY AND CONCLUSIONS
The financial position of KI Council necessitates it securing alternative sources of revenue in
order to ensure its fiscal sustainability, and the KI circumstances warrant the introduction of a
charge such as a Traveller’s Levy as one option for achieving this. The combined impacts of
a small rate-payer base and higher than average per-capita service-delivery costs, together
with significant levels of tourism activity – a key contributor to these service-delivery costs –
provide a rationale for a user-pays motivated levy on tourists.
The impacts of a Traveller’s Levy
The modelling undertaken here suggests that the introduction of a Traveller’s Levy would
have only a modest adverse impact on the Island’s tourism industry, and may indeed not be
detrimental at all. This reflects the finding that demand for visitation to KI is likely to be less
responsive to price (and hence a levy) than tourism on average, due to the relatively unique
nature of the KI tourism experience (i.e. the limited number of substitutes) and high level of
visitation by international visitors. Consequently a levy of around $8-$11 will raise Council’s
target revenue of $1.8 million annually.
Considering purely a price impact and taking no account of any countervailing effects
resulting from improved tourism infrastructure, a levy of this magnitude would result in an
estimated reduction in visitation of between 4,500 and 5,500 visitors annually - a reduction of
around 2 to 3%. Associated with this would be a reduction in tourism expenditure on the
Island – and hence a reduction in the income of local tourism-related businesses – of
between $1.84 and $2.06 million annually. The flow-on impacts to the South Australian
economy would depend on the extent to which those who opt not to visit KI in light of the levy
substitute towards other destinations within the state.
However, this takes no account of the likelihood of a continued deterioration in the condition
of tourism infrastructure in absence a levy reducing tourism visitation. Or, moreover, that
improved or better-maintained infrastructure may in fact buoy demand for visitation to KI – a
response which would appear reasonably likely given current perceptions toward the quality
of road infrastructure on the Island.
Design and implementation
The most efficient levy design would involve exclusion of residents and a differential levy
based on traveller characteristics and length of stay. However, the logistics of collection and
the need to ensure the costs of compliance and administration are not overly onerous
suggest a flat per-passenger charge, with a potential reimbursement facility for local
residents travelling by air (those travelling by ferry could be charged a concessional fare). If
it could be achieved cost-effectively, equity considerations would also warrant excluding
children.
While a direct charge would provide Council greatest control over the specifications of a levy,
it is not clear that the Council (through state government legislation) would have the capacity
to regulate such a levy. In light of this, the most feasible mechanism for introducing a levy
would be through an increase in wharfage and landing fees, though even in here, legislative
hurdles remain. In addition, under this model, some control over the specifics of the levy
would be foregone as operators would be free to pass through the higher costs as they deem
appropriate.
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