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

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Commercial-in-Confidence KI Traveller’s Levy Impact Assessment 1. INTRODUCTION AND BACKGROUND Access Economics was engaged by the Kangaroo Island (KI) Council to undertake a study of the likely economic impacts of a levy on travellers to Kangaroo Island (a ‘Traveller’s Levy’). The aim of the study was to explore whether the KI circumstances justify the introduction of a Traveller’s Levy and to analyse what impacts such a levy would likely have on the local tourism industry, on residents, on visitors and on the broader economy. In addition, the study was tasked with canvassing options for design and administration and identifying practical impediments to the introduction and collection of a levy. Excluded from this is an assessment of any legal obstacles that the introduction of a Traveller’s Levy would face – though such issues are noted throughout this report, they have not been analysed indepth here and would need to be investigated in a dedicated piece of analysis. The approach to the study has been a multi-faceted one. Detailed desktop research was undertaken to survey the literature on the responsiveness of tourists to taxes and charges and to identify relevant case studies and examples which might inform the study. A purposebuilt economic model was constructed to simulate the impacts of a Traveller’s Levy on the KI economy under a range of alternative assumptions and designs. In addition, key stakeholders were consulted to canvass views toward a potential levy, collect anecdotal evidence of the possible impacts and explore practical issues and impediments to collection and administration. In the first instance, a Traveller’s Levy is modelled without direct regard to how the revenue generated is expended, or what the counterfactual may be in absence of a levy. Council’s financial position suggests that if a levy were not introduced, either roads and related infrastructure would continue to be under-maintained or alternative revenue would need to be sourced to fund adequate road maintenance (the feasibility of this is not examined here, though the options would appear few). Against a counterfactual where roads and road infrastructure are under-maintained over time, the road maintenance that a Traveller’s Levy facilitates can be expected to lead to an improvement in the KI tourism experience. Assessing the extent of this improvement, or its impacts on the tourism market, is challenging. This report outlines the findings of this study and presents an assessment of the overall net impact of a Traveller’s Levy for Kangaroo Island. It is structured as follows: The remainder of Section 1 provides background to the study, including an economic profile of KI and the KI tourism industry, the basis for considering a Traveller’s Levy and relevant case studies and examples. Section 2 overviews the economic principles and concepts underpinning the design of a Traveller’s Levy and its likely impacts. Section 3 considers, in light of the analysis in Section 2, the optimal design of a Traveller’s Levy. Section 4 presents the modelling framework and reports the results of economic modelling. Section 5 discusses practical and logistical issues surrounding the possible introduction and administration of a levy. Section 6 summarises the report’s key findings and conclusions. 3
Commercial-in-Confidence KI Traveller’s Levy Impact Assessment 1.1 KI REGIONAL PROFILE 1.1.1 GEOGRAPHIC CHARACTERISTICS Kangaroo Island is a 4,400km 2 island located some 112 kilometres southwest of Adelaide (see Figure 1.1). It is Australia’s third largest island outside the mainland (behind Tasmania and Melville Island) and represents its own Local Government Area (LGA), and Statistical Subdivision. Despite its proximity to Adelaide, the island is among the most isolated LGAs in South Australia, ranked fourth based on the Accessibility/Remoteness Index of Australia (ARIA). Access to the Island is via either air or ferry. Regional airlines REX and Air South offer regular flights to the Island’s Kingscote airport while ferry operator SeaLink provides a passenger and vehicle ferry service on the 45 minute route from Cape Jervis to Penneshaw. FIGURE 1.1: KANGAROOS ISLAND AND SURROUNDS Tourist attraction Urban boundary ADELAIDE MURRAY BRIDGE STRATHALBYN VICTOR HARBOR STOKES BAY EMU BAY KINGSCOTE CAPE JERVIS CAPE BORDA LIGHTHOUSE KINGSCOTE AIRPORT PENNESHAW (L) AMERICAN RIVER (L) EMU RIDGE EUCALYPTUS DISTILLERY CLIFFORDS HONEY FARM CAPE WILLOUGHBY LIGHTHOUSE FLINDERS CHASE VIVONNE BAY KELLY HILL CAVES SEAL BAY SOUTHERN OCEAN LODGE ADMIRALS ARCH GIS data © Commonwealth of Australia 0 30 60 kilometres 1.1.2 DEMOGRAPHIC CHARACTERISTICS The 2006 Australian Bureau of Statistics Census reports the KI population at 4,261. At this time an estimated 2,209 people, or a little over half of all KI residents, were in the labour force (employed or actively seeking work), and of these, 2,119 were working in paid employment, including 1,168 in full-time positions. Just 90 people were classified as unemployed, placing the Island’s unemployment rate at 4.1% (Table 1.1). 4
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