The controversial hotel bed tax introduced by Auckland Council has been given the go-ahead by the Supreme Court. The hotel bed tax was initially meant to boost tourism funding and was first implemented in 2017.
The Supreme Court ruling on Friday determined that the accommodation providers targeted rate (APTR) was reasonable and complied with the legislation in the Local Government Act 2002.
Some adjustments to the tax are required, however. The Ruling stated that the council admitted there were various circumstances where it was not practicable for providers to pass on costs or that doing so would result in a drop in demand.
Hotel Council Aotearoa strategic director, James Doolan said that in some ways, this decision will have little practical impact on tourism funding.
“The APTR was suspended during COVID because it wasn’t working and would have sent some small operators out of business. Council appears to now accept that the APTR is a poor way of funding destination marketing and event attraction. The APTR was a targeted rate under which accommodation providers paid one-half of the costs to receive one-tenth of the benefits. It could not be passed on to guests as an additional charge at check-out, which meant accommodation providers were all affected in different ways.”
Since its formation in 2020, Hotel Council Aotearoa has consistently and repeatedly called on local and central government to work collaboratively with key tourism stakeholders on agreeing principles for a fair, reasonable and nationally-endorsed funding model for the tourism industry. The
“Any new funding regime should draw upon international best-practice, as opposed to being hurriedly designed to meet short-term objectives,” Doolan said.
The tourism industry generated almost $3.9 billion annually in GST revenue in pre-covid times, as well as an additional $3.1 billion in tourism-related taxes such as PAYE, profits tax and excise taxes. Hotel Council Aotearoa is disappointed by the decision made by the Supreme Court. The group was not party to the litigation, but the ruling affects its members and the entire tourism industry.
International tourism accounts for more than 20 percent of all New Zealand exports, and unlike most other export sectors, the central government collects GST on spending by international tourists.
“Central government’s tax take from tourism is not fully reinvested in the sector, nor is it adequately shared with local authorities to support investment in essential infrastructure. As a result, New Zealanders get frustrated with overcrowding and local authorities have turned to novel fundraising techniques, such as the APTR, to fill the funding gap” said Doolan.
“If New Zealand is going to fix our trade deficit problem, we need much better strategy and policy for tourism “The APTR is a relic from the bad old days of policymaking. Let’s hope we never see anything like it again.”
The APTR, one of about 11 targeted rates governed by Auckland Council, was suspended in 2020 due to the impact of the Covid-19 pandemic on the economy.
