The use of Tauranga Airport as a tax loss by Tauranga city Council is being questioned by the auditor Clarence Susan in his Management report on the audit of TCC for the year ended June 30, 2017.
Made public at the Audit, Finance Risk and Monitoring Committee meeting on December 19, the report refers to the council using airport losses and revaluation increases in the airport's infrastructural assets, to increase tax losses for the city council.
The tax losses have significantly increased the council's deferred tax liability in relation to property plant and equipment, says the auditor.
Local authorities are subject to tax on income from port operations.
“However in our view it is unclear whether the airport should be treated as a port operation,” says the auditor.
The Port companies Act 1988 refers to property and rights of a harbour board that relate to the activities of commercial ships, hovercraft and aircraft or facilitate the shipping and unshipping of goods and passengers.
The definition would cover port facilities used by aircraft such as helicopters and float planes but this does not necessarily cover airports, says Clarence.
“At his stage we can accept council's tax balances as materially correct, however we strongly recommend that council confirms that the IRD agrees with its tax treatment of the airport operation.”
Tauranga city council chief financial officer Paul Davidson says it only affects the airport's passenger operations.
“What has happened is with the terminal redevelopment our landing fees going forward are increased significantly. So it will come into a tax paying positon. It has not been in a tax paying positon for a number of years,” says Paul.
“So if anything it's the opposite of a tax dodge. We haven't been claiming the losses that have been occurring. Going forward it will go into a tax paying position, so we want the returns to reflect that.”