Tourism back-taxes

NBR has a disturbing story:

Inbound Tour Operators Council of New Zealand president Brian Henderson said that the IRD had reneged on a formal written agreement signed in 2001, about the GST tax treatment of the fees that operators charged to overseas wholesalers for arranging tours.

The industry followed initial advice that the fees should be zero-rated, but the IRD had since changed its mind.

IRD officials said last week that they would seek back taxes initially around $50m, but they reduced that to two years’ worth or around $30m, Mr Henderson said.

Paying back taxes would put some members out of business.

This is the reality for many small businesses. They simply won’t have the money to pay taxes they have not budgeted for.

I have no issue that the IRD can change its mind about how the tax laws work. But it would seem much fairer to only apply their new thinking from the date they publish it to all affected taxpayers, and not to apply it retrospectively when it contradicts their previous advice. A hallmark of the law is meant to be certainity.

One News covered this last night, as did Three News.