Hotels take court action over ‘bed tax’
Auckland hotels and accommodation providers are taking court action to challenge the legality of a “bed tax” championed by Mayor Phil Goff in his first budget last year.
They have united under the name of Commercial Accommodation Rate Payers (CARP) and started a judicial review in the High Court at Auckland challenging the legality of the council’s accommodation provider targeted rate — similar to a bed tax commonly applied in hotels overseas.
The rate came into effect in July last year to help funding for Auckland Tourism, Events and Economic Development and other infrastructure projects.
The council budgeted to raise $13.45 million from the targeted rate in the 2017-18 financial year, but this was adjusted down to $13.1m in February this year because of a change in property data. The targeted rate is the equivalent of a 1 per cent rates increase, or thereabouts.
CARP is made up of a number of hotel, motel and serviced apartment providers seeking to rescind the targeted rate “due to its unfairness and the lack of consultation by Auckland Council”.
Members of the group said yesterday that they had taken the action reluctantly but felt they had no choice.
They noted the targeted rate was imposed only on commercial accommodation providers, who receive less than 9 per cent of the total visitor spend in Auckland, according to information from the Ministry of Business, Innovation and Employment ). Other industry sectors received a greater proportion of the visitor spend, but were not subject to the targeted rate, the statement said.
Among other things, the proceedings allege that:
● The council’s decision to introduce the targeted rate was unreasonable. The cost imposed on commercial accommodation providers is vastly disproportionate to the benefit they receive. This is particularly unreasonable in circumstances where the targeted rate cannot economically be passed onto guests, and when the targeted rate is not imposed on all participants in the market.
● In breach of the Local Government Act 2002, the council failed properly to make an assessment of the benefits of the activities funded by the targeted rate.
● The council breached the Local Government Act by failing properly to consult on the differential application of the targeted rate to different tiers of accommodation in different locations, or on the application of the rates remission policy for the purpose of the targeted rate.
● The council breached the Local Government (Ratings) Act and the Local Government Act by not following the special consultative procedure required when amending the LongTerm Plan.
Goff ’s office responded to questions about the court action by saying council would defend the action and released a statement the council made to the NZ Stock Exchange, which said legal proceedings began early this month (May 4) and had been foreshadowed for some time.