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ITOC News >
Media Releases
Media Releases
This page details the Media Releases that have been recently issued by ITOC:
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Date: 19 August 2008
MEDIA STATEMENT
Tuesday 19 August 2008
For Immediate Release
TOURISM OPERATORS DELIGHTED WITH NATIONAL PARTY COMMITMENT TO
LISTEN TO INDUSTRY CONCERNS ON $30 MILLION GST RORT
Inbound tourism operators are delighted with the National Party’s commitment, announced
by Shadow Finance Minister Bill English at their industry conference in Queenstown today,
to listen to industry concerns about 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.
Speaking to the conference, Mr English said that while the IRD had to be independent from
the Government, National was concerned about the growing tendency of the IRD “to change
their mind and claw back taxes”.
“We cannot maintain the integrity of the tax system ... if people cannot rely on written
agreements,” Mr English said.
He indicated he believed the issue should be resolved prior to the election but, if not,
“National would be ready with a listening ear”.
ITOC President Brian Henderson said his members were thrilled that National was prepared
to listen to the industry on the issue.
“The IRD’s conduct towards our industry really has been appalling and all New Zealand
taxpayers should be worried. Taxpayers must be able to rely on signed, written
agreements with the IRD, but that appears no longer to be the case.”
Mr Henderson explained that, in 2001, some 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.
In 2008, 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 says the situation is “unjust and outrageous” and risks jobs.
“Back taxes of $30 million would put some of our members out of business while others
would be forced to operate from Australia or China,” he said. “Kiwi jobs would be lost. The
connection between tour operators and the country we are meant to be promoting would be
broken.”
Mr Henderson said 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 said 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 said. “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?”
Tourism Minister Damien O’Connor also addressed the conference but received a frosty
reception when he criticised the tourism industry for raising the issue through the media.
Mr O’Connor claimed the industry was exaggerating the likely cost to operators from the
IRD u-turn but nevertheless said he would keep working to address the issue.
END
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