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20 July 20223 minute read

Supreme Court of New Zealand hears hotel tax case, Auckland Council v CP Group

The Supreme Court of New Zealand has been hearing Auckland Council v CP Group. This is an appeal on the validity of certain targeted rates which were levied differentially against informal accommodation compared to commercial providers. The purpose of these rates was to fund the agency Auckland Tourism, Events and Economic Development’s tourism and major events activities. 

The issues to be determined, are (1) how section 101(3) of the Local Government Act, regarding the appropriate source of funding for different activities, should be interpreted, and (2) how the leading authority on the exercise of rating powers, Wellington City Council v Woolworths New Zealand (No 2) [1996] NZLR 537, should be applied.

The Court of Appeal has held that Auckland Council had not complied with section 101 of the Local Government Act , specifically that when determining how it obtains funding, the local authority should consider the distribution of benefits between the community as a whole or any part of the community and individuals. The Court thought it was not necessary to make a finding on unreasonableness, but nonetheless held that it would have been unreasonable because the Council failed to consider the disproportionate impact on the group subjected to the rates.

Before the Supreme Court, Auckland Council seeks to argue that the Court below did not properly consider the legislative framework and democratic context of the Council’s rating powers. They argue that the focus on section 101(3)(a)(ii) was not broad enough and did not adequately look at the wider rating regime. Further, the Court of Appeal’s finding on unreasonableness was an inappropriate engagement with political subject matter.

The respondents are defending the judgment of the Court of Appeal on the basis that section 103(a)(ii) requires an assessment of who benefits, to what degree, and how, when funding mechanisms are highly targeted, like the measure in dispute. Failure to go through this assessment, meant that the Council placed more emphasis on avoiding an increase in general rates, than on the requirements of the Act. They further argue that it was unreasonable to place such a burden on accommodation providers who benefit less from tourism spending than many other sectors.

Whichever way the Supreme Court finds could send ripples through New Zealand’s Local Government sector. Given the significant infrastructure challenges that many local authorities face, which will only mount as the effects of climate change grow more extreme, targeted rates are an important funding tool. As such, anyone in local government and anyone who regularly works in the sector should watch this space.

More information can be found on the Supreme Court website here.

NB: This has been prepared with reference to the case synopses and submissions published on the Supreme Court’s website and does not include any comment on events that have occurred during the hearing.


Emma Moran and Michael Fitzpatrick-Cockram