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Tourism Operators Release 2001 Written Agreements

Wednesday 20 August 2008

Tourism Operators Release 2001 Written Agreements With Ird

The Inbound Tour Operators Council of New Zealand (ITOC) has released samples of the formal, written agreements its members signed with the Inland Revenue Department (IRD) in 2001 making clear that fees charged to overseas wholesalers for arranging tours should be zero-rated for GST.

The IRD has since changed its mind and has advised the industry that it will not honour the agreements. It will instead seek back taxes, the amount of which is in dispute, with the IRD advising Tourism Minister Damien O’Connor that it wants only $1-3 million but the industry having estimated that as much as $30 million may be at stake.

The IRD also appears to have falsely advised Mr O’Connor that the written agreements do not exist, while telling media yesterday that they were only `informal in nature’ and that ``the Commissioner of Inland Revenue has the discretion to change his position from time to time’’.

ITOC President Brian Henderson said his members were flabbergasted that the IRD appears to have been providing misleading advice to Ministers while all taxpayers would be alarmed that the tax department was so blithely saying it reserved the right to change its mind retrospectively on tax interpretations.

ITOC members were also surprised by reports Mr O’Connor claimed to have been `ambushed’ over the issue, Mr Henderson said.

``We have raised this time and time again with the Minister and the Ministry of Tourism, and we ensured they knew that the GST issue would be top of the agenda at our conference,’’ Mr Henderson said. ``We cannot account for why Mr O’Connor did not get himself properly briefed before attending our conference. We expect more from our Minister.’’

In contrast, Mr Henderson said his members were thrilled with Shadow Finance Minister Bill English’s commitment, announced yesterday, to tackle the issue.

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.

Mr English indicated he believed the issue should be resolved prior to the election but, if not, “National would be ready with a listening ear”.


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