Auckland Council's controversial bed tax found 'invalid' by Court of Appeal

The targeted rate was aimed at accommodation providers and used to fund Auckland Council's tourism arm. Photo / 123RF

Auckland Council's controversial Accommodation Providers' Targeted Rate has been ruled "invalid" by the Court of Appeal.

The rate - charged to hotels, motels, serviced apartments, and Airbnb and Bookabach accommodation - is used to fund the operations of Auckland Council's tourism arm and was introduced in 2017.

The Court of Appeal found the council did not have the power to target visitors directly through a bed tax or a visitor levy.

The Court of Appeal judgment said there was "virtually no assessment" from the council on the benefit to the targeted group.

"The council's failure to adequately consider this mandatory relevant consideration was an error of law going to the heart of the decision.

"Given the significance of this error to the rating decision in both years, we consider it impeached the validity of these decisions," the judgment said.

An Auckland Council spokesperson said it was "currently reviewing" the court's decision and would not comment on whether an appeal would be made.

"The parties now have 20 working days to file any appeal. It would not be appropriate to comment further at this time."

Hotel Council Aotearoa (HCA) strategic director James Doolan welcomed the court's decision and is asking the council to give accommodation providers some "much-needed certainty".

"HCA was not party to the litigation, however, the subject matter deeply affects HCA's members and all New Zealand overnight accommodation providers," Doolan said.

Tourism and hospitality businesses have made "significant sacrifices" since borders closed last year and Doolan said organisers are ready and willing to engage with the Government.

James Doolan, strategic director of Hotel Council Aotearoa, hopes future consultations with industry are "genuine and conducted in good faith".

"It is to be hoped that future consultations with industry are genuine and conducted in good faith. The last thing New Zealand's tourism industry needs now is further tick-box consultation exercises after 'in principle' decisions have already been taken by regulators," he said.

"True collaboration will mean it is unnecessary in future for commercial ratepayers to engage with local authorities in time-consuming and expensive litigation."

The Court of Appeal judgment also found the assessment was "carried out at the end of the process to reverse engineer a justification for a scheme that had been formulated without regard to the statutory criteria".

If the two parties can't agree on "consequential relief", the Court of Appeal said the High Court would consider it.

Commercial Accommodation Rate Payers was "delighted" with the decision but suspect the council may appeal to the Supreme Court.

"Given that the tourism and accommodation industries have yet to recover from the pandemic and council's finances are stretched, we hope that common sense prevails and that they don't [appeal]," the group chairman Terry Ngan said.

"As ratepayers, we would rather the mayor and council channel their efforts into working with industry on a solution that not only reflects the Court of Appeal's decision but is fair and equitable to all concerned at an appropriate time."