IRD Tax Compliance Focus 2011 - 2012

On 26 July 2011, Inland Revenue released its 2011/12 compliance focus report. The report, “Helping You Get It Right — Inland Revenue’s compliance focus 2011–12", groups compliance activities under four key themes:

1. Everyone should pay and receive the right amount

2. Inland Revenue should receive the right information at the right time

3. Everyone should file and pay tax on time, and

4. Inland Revenue should provide confidence and certainty to its customers.

Everyone should pay and receive the right amount

With this objective, Inland Revenue will:

• continue to focus on individuals who create structures to minimise their tax obligations or increase their entitlements.

• continue to actively identify companies, large corporations and high-wealth/income individuals who enter into complex financing arrangements.

• continue to examine large claims and the use of losses.

• continue to work closely with the Charities Commission to identify charities which misuse their tax exempt status

• evaluate information from New Zealand’s tax treaty partners and data from financial institutions and credit card service providers to identify suspect behaviour and trends

• strengthen its systems to identify suspicious activity, from sophisticated and organised schemes to basic scams, to prevent fraudulent refund or entitlement claims being issued, and

• continue to keep a close watch across all businesses and target those who are cheating the system (Inland Revenue is taking a particular interest in the hospitality, scrap metal, fishing and aquaculture, tourism, and agricultural and horticultural industries as areas that need to improve compliance).

Inland Revenue should receive the right information at the right time

With this objective in mind Inland Revenue is:

• working on a programme of activities to help employers improve the accuracy and timeliness of their employer monthly schedules

• continuing to raise awareness about which resident withholding tax (RWT) rate customers should use, and

• introducing a programme of activities to raise industry and non-residents’ awareness of their New Zealand tax obligations and what happens if they do not comply.

Everyone should file and pay tax on time

Inland Revenue notes that filing non-compliance is often caused by people not understanding or not knowing their tax obligations. Inland Revenue is reviewing its annual square-up process to make it easier for individuals to meet their obligations. A strategy is also being developed to encourage individuals to interact with Inland Revenue, using its secure online services.

Inland Revenue is actively contacting overseas borrowers who have student loan arrears to get them to repay their loans and any outstanding debt.

Inland Revenue will also focus on outstanding income tax, GST, PAYE debt, and on businesses that have defaulted on instalment arrangements or demonstrate serious non-compliance, and employers who are not meeting their KiwiSaver requirements on behalf of their employees.

Inland Revenue is contacting liable parents living in Australia who are not making any payment towards their child support arrears or meeting their ongoing obligations. If they continue to ignore their obligations, Inland Revenue will pass their details on to the Australian Child Support Agency who will follow up on them.

Inland Revenue should provide confidence and certainty to its customers

Inland Revenue notes that it is important that customers are given certainty about what is expected of them to comply. Providing clear guidance on obligations and improving their understanding of legislative and administrative requirements is the first step towards aiding compliance. Inland Revenue notes that some customers are still uncertain about their obligations in some areas. Inland Revenue has stated that it will be working hard to clarify areas of confusion to help customers manage their tax in the future.

If you think that you or your business could be affected by IRD action under this compliance strategy and you need legal representation, click here.

Based on a summary from CCH Tax