ACT proposes local tourism dividend as alternative to bed tax
The ACT Party wants to pay councils $1 for every guest night recorded in their area, using money from existing GST and visitor levies rather than adding a new charge on accommodation.
ACT leader David Seymour said the party would campaign on the "local tourism dividend" as an alternative to a bed tax — a small percentage added to short-term hotel and B&B stays. He argued the dividend was the better option. RNZ
The proposal puts ACT at odds with its coalition partner National. National leader Christopher Luxon told RNZ his party may look at a bed tax if re-elected, something Seymour immediately pushed back on.
Seymour estimated the dividend would send more than $40 million a year to councils, based on 2026 guest night figures. He said it could start as early as 1 July next year. A new tax, by contrast, would take at least a year longer because it would need fresh legislation passed through Parliament.
The gap between the two parties is straightforward. National is keeping a bed tax on the table; ACT wants to redistribute revenue the government already collects. The dividend approach avoids the political and practical hassle of introducing a new charge, but the money still has to come from somewhere in the existing budget.
Seymour did not say what would be cut or shifted to free up that $40 million. He indicated ACT would release a fully costed alternative budget later in the election campaign.
That leaves two open questions. The first is fiscal: moving $40 million from central government revenue to councils means something else loses funding, and until ACT's alternative budget is released, that offset is unspecified. The second is about fairness. A per-guest-night model favours councils with high visitor numbers relative to their ratepayer base — in practice, tourism-heavy areas like the South Island and parts of the Central North Island. Councils with fewer visitors would get less, and the formula does not account for the wear and tear visitors place on local roads, water systems, and waste infrastructure regardless of how the money is shared out.
The timeline claim is worth a closer look. Seymour's argument that a dividend could start by mid-2026 while a bed tax would take longer rests on the difference between an administrative transfer and creating a new legal levy. That is a fair point in principle, but the practical steps — agreeing on a funding source, working out the allocation method, and getting Cabinet and Treasury approval — still need to be sorted.
For the tourism sector, the two approaches create different incentives. A bed tax is paid by visitors, which makes it easier to justify as a user-pays system, but it adds a cost at the point of booking and could discourage some travellers. A dividend drawn from existing GST and levies leaves the visitor experience untouched, but it means the government gives up revenue it currently keeps.
The broader context here is that with both parties stating their positions openly, the bed tax versus dividend question is now a live issue heading into the campaign and, potentially, coalition negotiations. Seymour has committed to a fully costed alternative budget, so the fiscal detail will come later — but the disagreement within government on how to fund tourism infrastructure is already visible.
