Advisory fees facilitate inbound tour operations and attract GST at the standard rate
2015 case note - advisory services supplied to overseas operators chargeable with tax at standard rate - agent, domestic tourism products, packaging, zero-rating.
This was an appeal from the decision of the Taxation Review Authority ("TRA") that found advisory services supplied by the appellant to overseas operators were chargeable with tax at the standard rate under s 8(1) of the Goods and Services Tax Act 1985 ("the Act"). The appeal was dismissed.
Impact of decision
In determining whether goods and services tax ("GST") applies to a transaction, the focus is on the nature of supply and the contractual relationships actually entered into and carried out.
Facilitation services provided by a registered person in s 8(2B) of the Act include services that are included in or form part of the packaging and selling process. Packaging involves the action of putting things (domestic tourism products and services) together for a particular purpose (sale to overseas operators).
ID Tours ("the appellant") is described as a "Ground Handler" and a destination management company that provides advisory tourism services to cruise lines, incentive houses and a UK travel agent.
This decision concerns the appellant's appeal of the TRA's finding that it facilitated inbound tour operations for the purposes of s 8(2B) of the Act.
The appellant also appeals the TRA's finding that it supplied the advisory tourism services under contractual arrangements to overseas operators and that those services were received in New Zealand by another person so that, pursuant to s 11A(2) of the Act, zero rating does not apply.
The practical effect of the TRA's findings was that the appellant's services are chargeable for GST.
The appeal was dismissed. The High Court found that s 8(2B) of the Act applied to the appellant's advisory services, which were therefore chargeable with GST at the standard rate under s 8(1) of the Act. As s 8(2B) of the Act applied, it was unnecessary to consider the application of s 11A(2).
Whether the TRA was wrong in its finding under s 8(2B) of the Act
The High Court noted that it was open to the TRA to find that the appellant was not an agent of the overseas tour operators. The Court looked to the actual arrangements entered into by the parties and determined that the appellant formed two separate contractual arrangements, one with the overseas operator and another with the local suppliers.
As the Court found that the appellant was not an agent, it was necessary to consider whether its services consist of facilitation of inbound tour operations under s 8(2B) of the Act. This required an assessment of whether the appellant's business of providing advisory and "on the ground" services amounted to packaging one or more domestic tourism products and services for the purposes of the definition in s 8(2F).
The Court found that the prima facie meaning of facilitation of inbound tour operations is the provision of services in the process of or in the act of organising one or more domestic tourism products or services in New Zealand into a set of interdependent or related objects that are viewed as a unit.
The Court found that the TRA was correct to find the appellant's advisory services are an integral part of the process of packaging domestic tourism products and selling them to overseas operators. The High Court found that for the purposes of ss 8(2B) and 8(2F) of the Act, the appellant's advisory services consist of facilitation of inbound tour operations and are chargeable with GST.
The High Court also considered additional issues brought by the appeal.
Corroboration and creditability of evidence
- The appellant submitted that the TRA failed to provide reasons for not accepting the appellant's evidence. The TRA did not make any findings of credibility in relation to the appellant's evidence. The High Court noted that there is no requirement for the TRA to make express findings of witness credibility and none were required to the extent that the appellant's factual witness gave opinions as to the legal position.
- The appellant submitted that the TRA made incorrect findings of fact due to the absence of corroborative evidence provided by the appellant and the appellant should have been warned that it would need to provide evidence from overseas operators and local suppliers. The High Court found that there was nothing in the TRA's decision that indicated it would have reached a different conclusion had the evidence been provided. Ultimately the onus was on the appellant to demonstrate that the services should be zero-rated, which includes providing the evidence it deems helpful.
- The High Court found that the appellant's submission that the TRA failed to provide reasons for not accepting the appellant's evidence is incorrect.
Errors on record
- The appellant contended that the TRA incorrectly recorded its concession at  of the decision under appeal. The appellant raised this point on appeal because it says it goes to the question of whether the appellant is an agent of the overseas operator.
- The High Court found that the concession as recorded at  did not impact on the TRA's consideration of whether s 8(2B) of the Act applied. The High Court also noted that the TRA had already found that no agency relationship existed between the appellant and any of the overseas operators.
Errors of fact
- The appellant acknowledged that the errors of fact it alleged occurred are immaterial, but contended that their number may indicate the TRA reached conclusions not supported by the evidence.
- The High Court found that the facts the appellant says are erroneous appear to have been summarised generally by the TRA for the convenience of the reader without distorting the essence of the evidence.
Goods and Services Tax Act 1985