GST rules may send travel firm to wall

David Hogan, managing director of NTB Travel, says paying GST on services exported makes it hard to compete. Photo / Richard Robinson

GST rules are killing his business, says inbound tour operator David Hogan.

Hogan is managing director of NTB Travel in Auckland and has beenan inbound tour operator for 40years.

"Taiwan for example, we used to do about 10 to 15 groups per month," Hogan said.

"I do about probably one or two per year now," he said.

"This is because there's two major Taiwanese-owned companies that I can't compete with."

Alexandra Low, senior associate at law firm Buddle Findlay, is representing a group of New Zealand inbound tour operators.

There was a range of factors affecting companies, including the increased ease of doing business because of the internet and modern communications.

However, the biggest issue facing locally based operators was having to pay GST on services they exported, which overseas competitors could provide without that cost, Low said.

Foreign competitors might face charges in their countries but the reality was many New Zealand operators were struggling to compete, she said.

New Zealand businesses, such as lawyers and architects, generally did not have to pay GST on exported services but the complexity of the tour operators' business model meant they failed to qualify, Low said.

Tour operators provided non-resident wholesalers with information and advice about products.

Then when the wholesaler identified what they wanted, the tour operator would put together a package as an agent.

If the wholesaler did not order a package there was no charge for the service element but if they did there was only one bill and the margin was effectively the service charge, Low said.

For several years operators did not charge GST on their margins. Around 2007/08 Inland Revenue questioned this position but it was not until last year when the Prime Minister said it would apply to margins that operators knew they could no longer do so, she said.

Low had made submissions to the Minister of Revenue and planned to keep on fighting, although she was not confident of success.

"And I'm not confident that even if we do get it that we'll get it in time."