GST Challenging for Tourism Operators

( Increasing GST from 1 October will create challenges for tourism operators who have set their prices up to 2012, the Tourism Industry Association New Zealand (TIA) says.

“The tourism industry applauded the commitment to tourism showed by the Prime Minister’s pre-Budget announcement last week of an additional $30 million for international marketing. Operators will also welcome the cut in company tax rates.

“But today’s GST increase will create transitional issues as tourism operators working in the international marketplace set their contracts up to two years in advance. They will now need to decide whether they can raise those prices to take account of today’s increase in GST or whether to absorb the increase,” TIA Chief Executive Tim Cossar says.

Operators who have already taken bookings after 1 October are also asking whether they will now need to charge the GST increase. TIA, the Inbound Tour Operators Council (ITOC) and the New Zealand Hotel Council (NZHC) have been working with PriceWaterhouseCoopers to prepare an advice paper for members on the various technical aspects of accounting for the increase in GST. Some examples are attached, with further advice available to members on TIA’s website

The GST increase could impact on New Zealand’s relative competitiveness with other international destinations, Mr Cossar says.

“While we don’t think the increase will deter visitors from coming here, it may influence how much they spend while here.”

The government currently collects about $633 million in GST a year from international visitors. Increasing GST to 15% is set to increase this contribution to about $760 million a year.

The GST increase may also impact on domestic tourism, though this may be offset by the reduction in personal taxes, Mr Cossar says.

The latest Fly Buys/Colmar Brunton Mood of the New Zealand Traveller survey, which will be released by TIA next week, shows that 34% of New Zealanders said a GST increase would have no impact on their holiday spending.

29% of New Zealanders expected to cut back on their holiday spending if GST was increased. A further 24% of respondents said a GST increase would make them less likely to go on holiday.

“As we recover from the recession and work to keep increasing tourism’s contribution to the economy, the industry will be working hard to show both international visitors and New Zealanders that a holiday in New Zealand still represents value for money,” Mr Cossar says.

Media Release 20 May 2010 from