Hotels suffering during the pandemic clinched a major victory over the Auckland bed tax in court. Photo / 123rf
A tourism group says the Auckland council may have to repay tens of millions of dollars to accommodation providers after the appeals court ruled that a tariff intended for them was invalid.
and its fee payers also incur significant legal costs after a damning verdict found it had reverse engineering justification for the system.
The tariff imposed on hotels and other lodging establishments was pushed hard by Mayor Phil Goff, who sought an alternative to direct taxpayer funding for Ateed (now Auckland Unlimited) tourism promotion and large event work.
It was predicted to raise $ 26.9 million in 2017/2018, but that was cut in half after an outcry from the accommodation sector. The industry argued that it would only fund tourism and events advertising, but would not get anywhere near the full benefit of that work.
Initially, 236 providers were charged, some of whose tariffs doubled. The tariff imposed in 2018/2019 was expanded to include informal accommodation providers via platforms such as Airbnb – and then suspended in 2020 due to the Covid-19 outbreak.
The appellate court found that the council was not authorized to address visitors directly through a bed tax or visitor tax.
In its judgment it is said that there is “practically no assessment” of the Council of the benefit for the target group. “The Council’s failure to take due account of this overriding, relevant consideration was an error of law that went to the heart of the decision,” the judgment said.
“In view of the importance of this error for the rating decision in both years, we consider the validity of these decisions to be jeopardized.”
The court found that the council made virtually no assessment of the benefits to the target audience or how the benefits of the funded activity were distributed among other groups of fee payers and the wider Auckland community.
“Basically, this was due to the fact that the evaluation at the end of the reverse engineering process was based on a justification for a scheme that was formulated without taking into account the legal criteria.”
Prior to its inception, it was estimated that the price could add up to $ 10 a night to a hotel bill.
An Auckland council spokesman said yesterday evening that he was “currently reviewing” the court’s decision and would not comment on whether to appeal.
Commercial Accommodation Rate Payers (CARP) group welcomes the court decision that overturned a High Court decision.
“We suspect the Council could appeal to the Supreme Court on the mayor’s earlier statements. Given that the tourism and accommodation industries are still recovering from the pandemic and the council’s finances are tight, we hope that common sense prevails and that it does not. ”Said Terry Ngan, chairman of the Carp Steering Committee.
“As fee payers, we would prefer the mayor and the council to direct their efforts into working with industry on a solution that not only reflects the decision of the appellate court, but is fair and equitable for all parties at an appropriate time.”
The appeals court said the issue of “resale rights protection” would be decided by the high court if the parties could not agree.
The Aotearoa (TIA) tourism industry has long battled the rate, and its board chairman Chris Roberts said depending on how much the council raised the grand could be as high as $ 27 million.
The Council asked for the correct number, as well as for a comment on what alternative funding arrangements could be made for Auckland Unlimited.
TIA ran a campaign against the tariff proposal in 2017 that nearly nullified the idea, with Auckland city councils voting for a watered-down version at 12:10.
“It was very disappointing when this poorly conceived phrase was introduced,” said Roberts. “Congratulations to the small group of owners who brought this lawsuit and finally achieved a fair outcome for the Auckland accommodation sector.”
Smiles on faces
Hospitality New Zealand said the accommodation provider (APTR) target rate decision is made at a crucial time for an industry that is suffering from prolonged city lockdowns.
“This will bring a smile to the face of many accommodation owners who haven’t had much to smile about in 18 months,” said Julie White, chief executive of Hospitality NZ.
“This is not only important for companies in Auckland. Accommodation providers and other industries across the country will also breathe a sigh of relief as this has had the potential to be taken up by other councils, “she said.
“It is now clear, as reflected in numerous submissions to the Auckland Council and initial consultations in which Hospitality NZ members have been heavily involved over the past five years, that the Auckland tourism fundraising mechanism is geared towards the lodging sector was not fair to. “
The benefits to operators are very limited, and the court has recognized that, she said.
The councils were forced to take into account this target rate of funding tourism in their cities as the industry was so underfunded.
“Now the question of interest is off the table, the central government must move forward and examine how our once greatest moneymaker” [tourism] Come back from Covid and rebuild with a fair funding mechanism that involves both industry and government, “White said.
“It is imperative that the industry is involved in shaping the funding mechanism to bring tourism back to pre-Covid levels and stronger.
“Operators continue to suffer badly, many are still on their knees, and the recovery will take a long time. For some it will take three to five years to get back to where they were before Covid, so we need solutions, and that fast.”
James Doolan, strategic director of Hotel Council Aotearoa (HCA), said the decision will have implications for other areas of the business as well, as it is aimed at what to consider when local authorities try to set new target tariffs for subsectors of the industry.
“The court’s decision is in line with HCA’s own submission to the Auckland Council in March 2021, which permanently removes the APTR. We ask the Auckland Council to give housing providers the much-needed security by acting quickly now to implement the decision of the appellate court. ” .
“The question of funding tourism infrastructure is complex and nuanced and the HCA understood the Auckland Council funding restrictions, although the rate was clearly a bad response,” he said.
Since its inception in 2020, HCA has consistently and repeatedly urged local authorities such as the Auckland Council and Queenstown Lakes District Council, as well as the central government, to work with HCA and other major tourism stakeholders to establish principles for a fair, sensible, statewide agreement-endorsed Financing model for tourism.
“Any new funding system must be based on international best practices and solid research. Tourism is an internationally competitive company. The fundamental problem of tourism finance has not changed in the four years since the APTR was launched, ”said Doolan.
The central government now had to do more for the tourism sector, which before Covid-19 competed with dairy products as New Zealand’s biggest money-maker abroad. It generated nearly $ 3.9 billion in GST revenue annually, as well as an estimated $ 3.1 billion in additional tourism-related taxes such as PAYE, income taxes, and consumption taxes.
“Central government tax revenues from tourism are not fully reinvested in the sector, nor are they appropriately shared with local authorities to support investments in basic infrastructure. As a result, New Zealanders are frustrated with overcrowding and local authorities are turning to new fundraising methods. like the APTR to fill the funding gap. “
Doolan said international and domestic tourists are already “paid” in New Zealand and the 15 percent GST is being imposed with no exceptions or discounts for international tourists.
This 15 percent was significantly higher than the total sales taxes plus bed taxes paid in almost all comparable destinations worldwide. Australia has a GST of just 10 percent and no bed tax.
“Until international tourists get a vote, central and local government politicians will be tempted to introduce new tariffs, taxes and fees that target tourists and tourism businesses,” he said.
“Tourism and hospitality companies have made significant sacrifices since the borders were closed in March 2020. Tourism industry organizations – including HCA – remain ready and willing to engage with the government in real and lasting solutions to the national tourism finance problem. “
New solutions should be implemented with reasonable deadlines.
Doolan said it was hoped that future consultations with the industry would be genuine and conducted in good faith.
“The last thing the New Zealand tourism industry needs now is further consultation now that regulators have made ‘fundamental’ decisions.”