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Airbnb has argued requiring it to levy GST on bookings would amount to an “unfair new tax on tourism”.
A tax change that would require Airbnb and Uber to levy GST on accommodation and rides booked through their websites looks set to proceed as planned, but only if Labour wins the next election.
Parliament’s Finance and Expenditure select committee has approved a tax bill paving the way for the change, with no significant amendments.
However, National Party finance spokesperson Nicola Willis has promised the party would reverse what she described as the “app tax”.
The law change would require large digital platforms that provided ride-sharing, food and beverage delivery, and short-stay and visitor accommodation, to levy GST on bookings.
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That would alter the current situation under which Airbnb hosts and Uber drivers are responsible for levying GST on their services themselves, but only need to do so if they are over the $60,000 annual revenue threshold at which businesses have to register for GST – which most aren’t.
Inland Revenue has estimated the new tax rule would raise $47 million a year, and the Government has presented it as putting the “gig economy” giants on a level-playing field with traditional hotels, motels and taxi firms which need to levy GST on all their bookings.
STUFF
Bryan and Megan Bell have spent years working on the deconsecrated Anglican church, now open for Airbnb guests.
But National MPs on the select committee issued a minority report condemning the change, saying it would “worsen the cost of living crisis” by increasing the price of food, transport, and accommodation.
It would also create “a new specific set of rules” for digital services providers that were not faced by other sole traders or businesses who were under the $60,000 threshold and did have to charge GST on their services, they said.
The select committee was lobbied by a large number of Airbnb hosts opposed to the tax change, but Deloitte tax partner Robyn Walker believed some might have overestimated the likely impact of the legislation on their own back pockets.
Under a streamlined regime designed to reduce red tape, Airbnb and Uber will be required hand back 8.5 cents of each 15c of GST they collect to hosts and drivers as a proxy for the GST hosts and drivers would normally be able to reclaim on their costs if they were registered for GST.
That arrangement, which Walker believed was probably relatively generous, means Inland Revenue will get only 6.5c of each dollar spent on stays and rides by way of the sales tax.
In practice, the law of supply and demand meant that 6.5% tax burden was likely to be split in some proportion between hosts and drivers on the one hand, and their customers on the other, she said, with the price of Airbnb stays and Uber rides likely to rise, but not by the full 6.5%.
The proposed April 2024 enactment date meant the gig economy companies probably wouldn’t have time wait to see who won the election and what then happened before deciding whether to invest in adapting their technology systems, she said.
“There’s a little bit of uncertainty around the political situation, but people probably need to plough ahead and start building systems to comply.”
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