Tourism operators wary of possible increase in GST

News Release:            Friday 11 December 2009

Inbound tourism operators wary of possible increase in GST

The Inbound Tour Operators Council of New Zealand (ITOC) is concerned that any increase in the level of GST will have a major impact on tourism.

Brian Henderson, President of ITOC says “Currently there is a great deal of discussion taking place on possible changes to the New Zealand taxation system and some commentators have suggested raising GST to either 15 percent, 17.5 percent or 20 percent.” 

“While we welcome open discussion on this subject it is clear that little thought has yet been given to the impact on inbound tourism which is one of New Zealand’s largest export industries.  For New Zealand to recover from this recession and grow economically it is essential for it to have a strong export industry. However tourism is the only export industry that pays GST –contributing in excess of $500 million a year to the consolidated fund.”

“Our main concern is around competitiveness issues and in particular the ability of inbound tour operators to compete under a tax system in the face of overseas based competition.  We are already being disadvantaged by the current GST policy where inbound tour operators owned offshore, but selling New Zealand product, can zero rate their facilitation fee on their packages when locally owned companies cannot. This situation has prompted a number of New Zealand based inbound tour operators to reconsider their operations in this country. “

“Clearly any increase in GST will have a further detrimental impact on inbound tour operators, not only by increasing the cost of product to customers but also by increasing the advantage that offshore inbound operators already have in zero rating their facilitation fees. “

“Higher GST means that international tourists who are considering visiting New Zealand will find Australia and South America a less expensive option and domestic tourists will find that a Queensland holiday will cost the same as before but a Queenstown trip will go up in price.”

“We will continue to press for a fair tax system to allow New Zealand-based companies to compete and continue to market their products around the globe and urge the government to fully investigate the competitiveness issue surrounding tourism before committing to any change in GST.” said Mr Henderson.

Background:

International tourist expenditure accounted for $9.3 billion or 16.4% of New Zealand’s total export earnings in the year ended March 2009.

Papers suggesting an increase in the level of GST were recently discussed by the Tax Working Group, a partnership between the Victoria University of Wellington, Treasury and Inland Revenue.

ITOC Background:

The Inbound Tour Operators Council of NZ was founded in 1971. It represents 250 tour operators and suppliers throughout the country who package, distribute and market New Zealand tourism products and services internationally.

ENDS

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