Set amongst the picturesque lakes of Muskoka, Ont., the town of Huntsville is looking to optimize its tourism appeal. On Oct. 29, the Huntsville City Council approved a Municipal Accommodation Tax bylaw that will see a new tax, set at a rate of four per cent, added to the room costs of visitors temporarily staying in establishments like hotels and motels. The bylaw is set to take effect on April 1, 2019, and comes after the Ontario government passed a bill allowing lower-tiered municipalities to tax temporary accommodations.
Although taxing tourists doesn’t seem like the most logical business strategy, Huntsville Mayor Scott Aitchison is confident the tax will help the town develop into one of Ontario’s premier tourism destinations. “The [city council] has conservatively estimated that in the first year it will bring in in the neighbourhood of $750,000,” says Aitchison. “We think that will grow as it matures.”
As dictated by the legislation, however, at least half the revenue accrued must go towards a tourism entity, with the remaining half going to the municipality. In the case of Huntsville, the city council has determined that 70 per cent of the profits will go to a yet-to-be-created tourism entity—featuring members of the municipality, chamber of commerce, downtown business improvement association, and hotel and resort owners—and the remaining 30 per cent will be used by the municipality on tourism initiatives. “We want to make sure that every nickel of this money that’s generated is actually spent back on tourism-related efforts,” Aitchison says. This includes minor projects like marketing and larger projects like working on the town’s hockey arena, where they often host visitors from other municipalities for tournaments.
City council is looking to expand the tax beyond hotels, motels, and resorts by including private cottage rentals such as those listed on Airbnb. “We’re looking for the people who actually run a business out of a residence or a recreational property,” Aitchison says, not the families who rent their cottages out for two to three weeks each summer. “We’ll have to come up with a licensing scheme, but I think once we’ve figured that out, this tax will generate well over $1 million in excess a year.” The tax will only apply to hotels, motels, and resorts for the first year of the three-year pilot project. Aitchison also stresses that this is a consumption tax and will not affect property owners. “We couldn’t afford to do this off the backs of the property tax payer,” he says.
In preparation for passing the bylaw, city council examined a number of other municipalities that have or are in the process of implementing a similar tax, such as Ottawa, Barrie, and Mississauga. “There are lots of jurisdictions all over North America that have these and it works,” Aitchison says. “It works very effectively.” With a population of approximately 20,000, Huntsville will be one of the first municipalities of its size to implement such a tax.
This doesn’t mean everyone is happy with the new bylaw, though. “There’s been a few local folks that are opposed to it and think it’s a terrible idea,” Aitchison says. Because of this, a select number of establishments, such as Cedar Grove Resort and Clyffe House Cottage Resort, will be exempt from the tax for at least the first year due to their concern over being placed at a competitive disadvantage compared to the larger resorts.
Aitchison says he realizes that the tax won’t make everyone happy and may even deter a few visitors, but looking at the larger picture, he is adamant that the new tax will be nothing but beneficial. “This has the potential to really get some marketing done for Huntsville and the broader Muskoka surrounding area.”