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GST increase creates challenges for tourism operators

May 21, 2010
Increasing GST from 1st October will create challenges for tourism operators who have set their prices up to 2012, according to the Tourism Industry Association New Zealand (TIANZ).
TIANZ Chief Executive Tim Cossar explains âthe tourism industry applauded the commitment to tourism showed by the Prime Ministerâs pre-Budget announcement last week of an additional $30 million for international marketing. Operators will also welcome the cut in company tax rates.
âBut todayâs 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 todayâs increase in GST or whether to absorb the increase.�?
Operators who have already taken bookings after 1st 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 TIAâs website.
The GST increase could impact on New Zealandâs relative competitiveness with other international destinations, Cossar adds, stating âwhile we donât think the increase will deter visitors from coming here, it may influence how much they spend while here.�?
The New Zealand 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.
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.
âAs we recover from the recession and work to keep increasing tourismâs 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,�? concluded Cossar.

http://www.tianz.org.nz

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