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Legal challenge flagged for “faulty, unrealistic and impractical” rate

“Kiwi mums and dads” stung by a new short-let bed tax are petitioning Auckland City Council and have signalled possible legal action.

Describing the extension of commercial rates to cover short-let homes as a “draconian” new tax, operators have set up a petition on change.org barracking against the legislation.

While the city’s hotels and accommodation providers are already pursuing a High Court judicial review over the legality of the bed tax introduced for commercial operators in June, Airbnb hosts are now considering a similar challenge against its introduction for short lets.

The current legal challenge mounted by Commercial Accommodation Rate Payers (CARP) alleges the council’s decision to introduce the targeted rate is unreasonable and the cost imposed on commercial accommodation providers is “vastly disproportionate to the benefit they receive”.

It is supported by representative bodies Hospitality New Zealand and Tourism Industry Aotearoa, the latter a vocal supporter of extending the bed tax to cover short lets – while lobbying for it to be lower across the industry.

Bachcare founder Leslie Preston says her legal advice indicates short-let hosts have an equally strong legal basis for challenging the council’s decision.

“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,” she said.

In a press release under the name of Alan Wake, the short-let hosts argue that owners facing a rate increase of thousands of dollars will either have to increase their rental fees or delist their properties on sites such as Airbnb and Bookabach.

“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,” it says.

“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 percent of all revenue from tourism comes from locals and 40 percent from foreign visitors. The council should tax the tourist and avoid imposing more tax on Kiwi mums and dads.”

Airbnb hosts who rent out properties for more than 28 days a year are being charged at partial to full business rate percentages (dependent on how many days they operate) to bring them into line with motels and hotels.

Rates levels are judged on the value of their property, with a $1m property in a prime Auckland location liable for a bed tax of around $6,700 per year.

Auckland council’s manager of financial policy, Andrew Duncan, said the authority had consulted widely over the bed tax and 68 percent 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 the council’s budget for staging major events and attracting tourists to the city.

The short-let petitioners point out that recent research by Deloitte Access Economics shows Airbnb contributed around $200 million to the local Auckland economy in 23017, supporting almost 2000 full-time equivalent jobs.

“This tax is wrong, it discourages competition and goes against the global trend of sharing economy which supports growth,” said the press release.

“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.”

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

Ms Preston called for a wider debate and a “national solution” on regulating short-let rentals.

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Kate Jackson

Kate Jackson is the editor of Accomnews. You can reach her at any time with questions or submissions: editorial@accomnews.co.nz

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