Law change to clarify inbound tourism GST

The Government will introduce legislation to clarify GST on facilitation fees charged to inbound tour operators, Tourism Minister John Key and Revenue Minister Peter Dunne announced today.

"Lack of certainty about whether GST should be applied to facilitation fees has led to confusion and frustration over the past nine years," says Mr Key.

"We intend to make law changes as soon as possible that will make it clear that GST should be applied at the standard rate to all facilitation fees.

"That is, and always has been, the intention of law that was enacted in 2001."

Mr Dunne says the uncertainty, coupled with inconsistent application and various interpretations of the law over the last nine years have not been helpful.

"During that period, a number of operators evidently zero-rated the offshore facilitation fees, potentially facing back taxes.

"It is time to bring the to-ing and fro-ing to a halt and make it crystal clear what the correct GST treatment should be."

To ensure that any adverse effects are minimised by the legislative clarification, the Government will also introduce a transitional provision for the year to 1 July 2008 that will allow all inbound tour operators to zero-rate facilitation fees charged to offshore tour operators for that period.

That provision will apply for one year only, and those who have already accounted for GST on those fees will be able to request a refund for that year.

"From then on, all such fees will be standard-rated for GST purposes, as will be clearly and unambiguously spelt out in the law," says Mr Dunne.

Inland Revenue has advised the Government that it will not pursue the cases of inbound tour operators who zero-rated these facilitation fees in the period to 1 July 2007.

Mr Key says this is a sensible decision that will help to resolve a problem that has gone on too long.

"We are confident these changes will be made before the end of the year."