Say "No" to Auckland Council Bed Tax!

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Auckland Council is faced with ratepayers revolt over its newly-imposed "bed tax", asking holiday home owners to pay thousands of dollars more in rates, with some facing increases of between 200 and 300 per cent. Holiday home owners stung by rates hikes may take legal action against Auckland Council. 

This is a precedent and many other local councils will follow suit, imposing rate increase on holiday homes across NZ. All New Zealanders will be negatively impacted with this draconian new tax. Facing a rate increase of thousands of dollars, many owners will either have to increase their rental fees or opt out. This means that everyone who books a holiday in NZ will unfortunately have less options to choose from and pay much more for their holiday!

Spending by Kiwi tourists was $21.4 billion in 2017 while international tourist spending was only $14.5 billion: two thirds of the local spending. An increase in cost will undoubtedly lead to a decrease in spending, which could have a severe negative effect on many sectors of the economy - not just the hospitality sector. 60 per cent of all revenue from tourism comes from locals and 40 per cent from foreign visitors. The Council should tax the tourist and avoid imposing more tax on Kiwi Mums and Dads.  

Information supplied by Auckland Council said that a $1m property in a prime Auckland location was liable for a bed tax of around $6,700 per year! The bed tax is one part of a double-whammy in new costs for homeowners who rent properties online. They are also being charged at partial or full business rates, rather than residential rates – to bring them into line with motels and hotels.

Chamber of Commerce chief executive Michael Barnett criticised the charges, saying that central government already claimed business tax from these small businesses. Auckland Council was entitled, at most, to charge a business rate on the part of a private residence which was being used as a commercial operation, Barnett said.

Tourism Industry Association chief executive Chris Roberts said ratepayers who were renting out properties for more than half the year were clearly businesses and should be paying their fair share. His organisation was one of the strongest voices against the bed tax. Once it was introduced, the association successfully lobbied for it to be extended to online accommodation businesses. "It's a badly designed rate, but it's slightly fairer now," said Roberts. "The problem is that the rate is far too high, which is why people are feeling the pain."

"When it first came in, we had some of the bigger hotels facing rate rises of half a million dollars a year. They've already gone through this pain, and now it's falling on private providers." Pitch said that once costs like maintenance and GST were included, the profits from an online accommodation website were much smaller. He estimated that he made $8,000 in the last year, which would be completely wiped out by his new rates bill.

Auckland hotels and accommodation providers are taking court action to challenge the legality of a "bed tax". United under the name of Commercial Accommodation Rate Payers (CARP) they commenced a judicial review in the High Court at Auckland challenging the legality of the council's accommodation provider targeted rate. 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." CARP said the judicial review proceedings were supported by the vast majority of large and small commercial accommodation providers in Auckland and many in the wider tourism industry, including Tourism Industry Aotearoa and Hospitality New Zealand.

Bachcare founder Leslie Preston said her legal advice indicated they had an equally strong legal basis for challenging the council's decision to hit holiday homes that are rented out for more than 28 days a year. "Our advice suggests that the Council has not followed a robust decision-making approach in implementing the new rates, and has come up with a flawed outcome," said Preston. Holiday home owners didn't oppose short term rental accommodation providers contributing to tourism funding, but the method used was unfair. A larger number of Auckland properties than normal were being removed from the Holiday Houses website because owners had found it was unsustainable to rent out their accommodation as short stay under the new rules. Preston said other regions were carefully watching the Auckland rating situation and it was important someone stood up for bach owners, who often rented out their properties out so they could stay in the family, rather than as money making ventures. Councils are limited in what they can rate so all across the country they're saying 'holiday home owners, we'll sting them because they are not civically active so we can get away with it'." Preston would like to see a wider debate on how local authorities fund tourism promotion and infrastructure. "We need a national solution to stop all this ad hoc approach with every council doing something different.

Auckland Council's manager of financial policy Andrew Duncan said the Council had consulted on the bed tax and 68 per cent of 16,000 submissions were supportive. "We have taken care to develop a system that reflects the scale of the commercial operation being undertaken so that levels of rates charged are commensurate," he said. The revenue will fund half of Auckland Tourism, Events and Economic Development's budget for putting on major events and attracting tourists to the city. Unfortunately, most of those who supported the submission probably underestimated the impact of this new tax on the tourism industry and on the NZ economy!

Bookabach general manager Peter Miles said his company had flagged concerns that the rate rises would be excessive during the consultation period. "This has unfortunately occurred to the detriment of Auckland's tourism sector and the mums and dads who let out their baches. "Without this extra supply of tourism accommodation, we fear the family holiday will get more expensive with less choice for travellers."

Bookabach is NOT in favour of the Accommodation Providers Targeted Rate (APTR).  The APTR levy unfairly targets accommodation providers when many other businesses - restaurants, bars, transport, activity providers - benefit from tourism.

Auckland Council’s attempt to position the APTR as a “Bed Tax” confuses the matter. A proper bed tax can be passed on as a line item to a traveller.  The traveller sees the charge and understands what it is for. Rates are an overhead and an accommodation provider would have to put up their nightly rates to compensate for it.

The APTR funds generated through home sharing will support Auckland Tourism, Events and Economic Development (ATEED) to attract more visitors to the city and grow the visitor economy. Recent research by Deloitte Access Economics confirms that small businesses across New Zealand are benefiting from the growth of Airbnb. Key findings from the 2017 report include:

  • Airbnb community contributed around $200 million to the local Auckland economy supporting 1,976 full-time equivalent jobs.

    The Airbnb community in Auckland hosted 322,000 guests for more than 509,000 nights.

    Around two-thirds of Airbnb’s 1.4 million guests who visited New Zealand in 2017 were from overseas.

The council says the new charges are still being refined, and it has encouraged ratepayers to appeal if they feel they have been overcharged.

This tax is wrong, it discourages competition and goes against the global trend of sharing economy which supports growth. The private sector helps in reducing accommodation costs for Kiwi families and for tourists, especially during peak season or major events when more beds are available without the need to invest in costly hotels. The APTR could cause a negative domino effect, adversely impacting our economy and NZ tourism. It is a totally disproportionate tax which unfairly targets a specific group. Its implementation is faulty, unrealistic and impractical, defying its intended purpose. This could be a slippery slope when questioning the subtle difference between short term (holiday) rentals and long term (residential) rentals. Why would one be treated different than the other? Both provide accommodation services and both incomes are taxed the same by the government. Will Auckland Council start charging commercial rates from every landlord or from people who run a business from their home?

The NZ Government should impose a tax on tourists instead of increasing rates.

Please sign the petition and tell Auckland Council to go back to the drawing table. Say "No" to Auckland Council Bed Tax!