'Time running out' for tax dodgers as Inland Revenue announces details of crackdown

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Inland Revenue has outlined how it will use the $29 million it was allocated for compliance in the Budget this year.
Photo: RNZ

Inland Revenue (IR) is warning “time is running out” for people who are deliberately avoiding their tax obligations – as one tax expert warns more scrutiny is coming across the board.

IR has outlined how it will use the $29 million it was allocated for compliance in the Budget to target people who had not met their tax obligations.

Commissioner Peter Mersi said 90 percent of taxpayers had no tax debt but some people had difficulties meeting their tax payments.

“For those who deliberately flout the rules, time is running out. We have the tools, data, and analytical capability to identify who is and who isn’t doing the right thing. The funding will mean we will have more people to be across all of these areas.

“We will also have additional people on board to investigate and undertake audits.”

He said debt had been rising due to Covid-19 and the subsequent challenging economic conditions.

“But tax obligations must be met, in fairness to everyone.”

Individuals’ income tax debt had increased from $1.1 billion in March 2023 to $1.6b this March. For non-individuals it lifted from $540 million to $773m over the same period.

GST tax debt increased from $1.9b to $2.6b.

“We’re prioritising our compliance work to follow up outstanding returns, collect overdue debt, and prosecute taxpayers where necessary,” Mersi said.

“And of course, we’ll continue to offer help for people to get things right.”

He said IR would look at a range of areas, including the “hidden economy” retail sector and trust compliance.

“Inland Revenue will also work to reduce systemic risks in areas such as cryptocurrency, electronic sales suppression tools, organised crime and corporate restructures.

“We plan to increase debt collection from overseas based student loan debtors and people who took out Small Business Cashflow Scheme loans,” he said.

Student loan overdue debt would use $4m of the $29m of compliance funding.

IR will run a new campaign contacting overseas-based student loan borrowers who own property in New Zealand.

“If you’ve got an investment property here, you should be meeting your loan repayment obligations,” Mersi said.

Enforcement activity would also be stepped up in the construction industry.

Those working in the construction sector will receive extra scrutiny.
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IR has been running unannounced visits to construction sites since the start of July and was also approaching cryptocurrency traders to give them a “final chance” to report their income.

He said people who had tax debt should talk to IR early to avoid harsher outcomes.

A tax partner at Deloitte, Robyn Walker, said it had been clearly signalled by the Revenue Minister that there would be more focus on compliance with tax laws, across all taxpayers.

She said the message was that it did not matter whether a business was big or small,. It was expected to pay its fair share of tax and comply with tax laws.

IR had not been doing a lot of compliance activity in recent years, she said, because it had gone through the process of updating its computer systems and transforming the business and then Covid-19 hit.

“The focus is really now ‘no more Mr Nice Guy’ and heightening people’s awareness that they are going to be looking closer.”

She said people should ensure they had their “houses in order”.