GST ruling could bankrupt some businesses

A landmark ruling by the Supreme Court allowing Inland Revenue to hold onto GST refunds for as long as it likes could easily push some firms out of business, the Employers and Manufacturers Association says.

“This is a serious issue that requires a law change to remedy,” said EMA chief executive Alasdair Thompson.

“Many businesses operate on tight margins and delays to their GST refunds can severely harm their cash flow, require more debt, and add more business costs.

“Some refunds held up long enough could put businesses over the red line in terms of their solvency.

“The amounts involved could be the difference between continuing in business or not.

“We urge the government to clarify the law to ensure IRD cannot benefit from any lack of performance on its part. There needs to be clear criteria under which the IRD can withhold GST refunds.

“We accept the Court’s ruling (against inbound tourism operator Contract Pacific) but note the Court’s comment that the law it upheld is poorly drafted. That signals that it’s a matter for Parliament to resolve.”