Tourism operators expect support from O'Connor over $30m gst rort

Tuesday 19 August 2008, 11:13AM
By Inbound Tourism Opertors of NZ


Inbound tourism operators are seeking public support from Tourism Minister Damien O'Connor, at their conference in Queenstown today, over the Inland Revenue Department’s decision not to honour formal, written GST agreements it signed with the industry in 2001 and instead seek $30 million of back taxes.

ITOC President Brian Henderson will tell the Minister and delegates at the Millennium Hotel in Queenstown at 1.00 pm today that his members ``are appalled by the conduct of the IRD towards our industry’’.

``The IRD has behaved incompetently, arbitrarily and retrospectively,’’ he will say. ``It is out of control. We expect Mr O’Connor’s support on this matter. Taxpayers must be able to rely on signed, written agreements with the IRD.’’

In 2001, members of the Inbound Tour Operators Council (ITOC) signed formal, written agreements with the IRD about the GST tax treatment of the fees they charge to overseas wholesalers for arranging tours.

The IRD advised in the formal, written agreements that the fees should be zero-rated, and the industry has followed this advice.

Now, however, seven years later, the IRD has advised the industry that it has changed its mind, apparently because it believes it made an error.

In a meeting with the industry last week, top IRD officials said they would not honour the formal, written agreements signed with the industry in 2001 and would now seek back taxes.

Around $50 million was initially at stake, although, in recognition that it is responsible for the situation, the IRD has decided to look back only two years, reducing the amount owed to around $30 million.

Mr Henderson will say the situation is “unjust and outrageous” and would cost jobs.

``Back taxes of $30 million will put some of our members out of business,’’ he will say. ``Others will choose to operate from Australia or China. Kiwi jobs will be lost. The connection between tour operators and the country we are meant to be promoting will be broken.’’

Mr Henderson will reveal that when asked how it could be fair for the IRD to act unjustly and impose severe financial hardship on the industry, apparently because of its own error, IRD bosses said they could not answer the question, despite admitting that it was them who caused any confusion.

Mr Henderson will explain how the issue goes well beyond the tourism industry.

``If we cannot rely on written agreements with the IRD then no New Zealand taxpayers can,’’ he will say. ``What sort of tax system do we have when the IRD can impose massive, retrospective and arbitrary back taxes because – by its admission – it may have made an error?’’

Mr O’Connor will address the conference, at the Millennium Hotel in Queenstown, at approximately 1.15 pm today.

Opposition Deputy Leader and Shadow Finance Minister Bill English will address the conference at 2.15 pm and will also be asked to publicly back the industry.

The full conference programme can be found at