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Ability to pass on bed tax questioned

NZ Newswire logoNZ Newswire 28/05/2017

Aerial view of downtown Auckland and the Waitemate Harbour. © Chameleons Eye/REX/Shutterstock/Rex Images Aerial view of downtown Auckland and the Waitemate Harbour. The tax on hotels Auckland Council is considering to fund the city's tourism and event marketing efforts can't be passed on as a surcharge, according to a legal opinion.

Tourism Industry Aotearoa is sharing the legal opinion with Auckland Mayor Phil Goff and councillors ahead of their vote on the targeted rate proposal on Thursday.

The council's Annual Plan proposes to implement a targeted rate on commercial accommodation providers based on their capital value.

This could see a 150 per cent to 300 per cent rates increase for businesses, according to Accommodation NZ.

The council suggests the cost of the rate could be passed on.

The legal opinion by Lane Neave Lawyers commissioned by TIA says a surcharge to cover council rates potentially breaches both the Fair Trading Act and the Commerce Act.

The issue under the Fair Trading Act is the targeted rate is an operating expense and so should be in the headline cost of a hotel room.

Under the Commerce Act, fixing prices and agreements between competitors are not allowed.

TIA chief executive Chris Roberts says the proposed targeted rate is quite a different situation from public holiday surcharges applied by some hospitality businesses.

"TIA and the tourism industry continues to call on the council to reject the targeted rate. The proposal is based on bad information and a poor understanding of how the visitor economy works.

"We want to work with the council to find a fair and sustainable way for the commercial accommodation sector to make an appropriate contribution to the city's visitor and event promotion activities," Mr Roberts says.

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