The city, the chamber of commerce, and even the hotel industry are keen on the prospect of a hotel tax, but all say the current plan contains too many exemptions to make it worthwhile.
The territorial government is proposing legislative changes that would allow municipalities the option of imposing a tax on hotel stays of up to four per cent per night, a move that has broad support in Yellowknife.
But at a public hearing Wednesday on Bill 18, An Act to Amend the Cities, Towns and Villages Act, witnesses spoke out against the list of visitors who would be exempt from paying the tax.
That list includes GNWT workers and certain arms-length government agents travelling on business, patients on medical travel and their escorts, and visitors paying for stays longer than 30 days.
In a written statement read by a representative, the president of the Explorer Hotel said he supports a tax on tourist accommodations in theory, but not as written in Bill 18.
Ed Romanowski called the exemptions “quite impractical” and estimated that 25 to 30 per cent of his guests would be excluded from paying it.
What’s more, said Romanowski, that the cost of administering the levy would likely cost more than whatever amount the tax would bring in.
“The cost of administration would be in the millions of dollars for industry and government,” he said.
Romanowski also warned against placing any extra administrative burden on hotel staff.
It should not be up to the hotel’s front desk to verify the purpose of each traveller’s visit, collect a copy of government IDs, and process all this paperwork for the tax collectors, he said.
“If the government wants the hotel to document and administer the tax as outlined in the legislation,” he said, “perhaps a significant portion of the tax, say 50 per cent of it, should be retained by the hoteliers to pay for the cost of administering the tax.”
A simple solution, said Romanowski, is to apply the tax to all guests, regardless of their reasons for travel.
He said if the government wants to waive the tax for certain visitors, then it should grant the guest the option to apply for a rebate.
Mayor Mark Heyck was generally excited about the hotel levy, which would give the city a new and continuous source of funding for tourism, one of Yellowknife’s fastest-growing sectors.
Right now the city operates entirely off of property taxes, user fees, and grants from the territorial and federal governments.
But Heyck shared the Explorer Hotel’s concerns over the list of exclusions to the tax.
“Each exemption affects the overall amount to be collected, which in turn greatly affects the number of dollars that can be applied to the city’s tourism marketing efforts,” he told the committee of MLAs.
“Too many exemptions could affect the economic viability of the accommodation levy.”
The Yellowknife Chamber of Commerce also testified Wednesday in support of Bill 18, but said the maximum tax rate should be dropped from four per cent to three per cent.