Jobs would be lost among inbound tourism operators if Inland Revenue pursues back taxes relating to GST payments, the industry was told at its conference today.

Inbound Tour Operators Council of New Zealand president Brian Henderson said that the IRD had reneged on a formal written agreement signed in 2001, about the GST tax treatment of the fees that operators charged to overseas wholesalers for arranging tours.

The industry followed initial advice that the fees should be zero-rated, but the IRD had since changed its mind.

IRD officials said last week that they would seek back taxes initially around $50m, but they reduced that to two years' worth or around $30m, Mr Henderson said.

Paying back taxes would put some members out of business.

``Others will choose to operate from Australia or China. Kiwi jobs will be lost.''

IRD officials admitted that they had caused the confusion, Mr Henderson said.

``What sort of tax system do we have when the IRD can impose massive, retrospective and arbitrary back taxes because -- by its admission -- it may have made an error?''

IRD spokesman David Balham said that zero-rating was not an industry-wide practice, and many of the larger inbound tour operators paid GST.

It was not fair for some in the industry to enjoy a tax advantage denied to others.

``We acknowledge that a number of operators received advice from Inland Revenue in around 2001 that under some circumstances their services could be zero-rated for GST. This advice was informal in nature and was believed to be a fair treatment at the time.''

The department had modified its position, after talking to industry members who had clarified a typical arrangement, and had made it clear two years ago.

IRD estimated that the money owed was ``considerably'' less than the $30m claimed, and no shortfall penalties would be applied. For operators who received advice that GST was not payable, IRD was considering remitting interest which had arisen.

Payment by instalment would be considered by those facing severe financial difficulty.

``It should be remembered that the Commissioner of Inland Revenue has the discretion to change his position from time to time. This principle is backed by legislation and case law,'' Mr Balham said.