Inland Revenue funding used to support compliance

Inland Revenue (IR) has outlined how it will be using the $29 million allocated for compliance in this year’s Budget, targeting those people who - due to challenging circumstances or a deliberate decision - have not met their tax obligations.

The Commissioner of Inland Revenue, Peter Mersi, says most people do the right thing.

“About 90% of our customers have no tax debt, and they find meeting their obligations straight forward and easy. 

“We know some people have difficulties meeting their tax payments, and we want to help them get back to being fully contributing taxpayers. But 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. 

“Debt has been rising.  COVID and the subsequent challenging economic conditions have been significant contributing factors, with some businesses suffering cash flow problems choosing to prioritise other payments over tax. But tax obligations must be met, in fairness to everyone. 

“So, we’re prioritising our compliance work to follow up outstanding returns, collect overdue debt, and prosecute taxpayers where necessary,” Peter Mersi says. “And of course, we’ll continue to offer help for people to get things right.

The work ahead

“We’ll be taking a closer look at a range of areas including the hidden economy, the retail sector and Trust compliance, as well as increasing our audit activity.

“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,” Peter Mersi says.

For example 
 
Student loan overdue debt is a key area of focus and where $4 million of the additional $29 million compliance funding will be used. 

Most customers with student loan debt in default are based overseas. Inland Revenue will be increasing compliance in this area, including a new campaign where we will be contacting those 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.

After working closely with the construction industry in recent years to help people understand what they need to do, we'll be increasing our enforcement activity this year. 

We’ve been actively encouraging businesses in the construction sector to sort their tax affairs through our Tax Toolbox media campaigns. We’ve also started texting those with high debt to encourage them to get in touch about working things out.
 
In the first week of July, we started unannounced visits to construction sites. Debt collection and audits are also now getting underway in earnest. 
 
The taxation of multinationals is a focus both within New Zealand and in other tax jurisdictions. For both multinationals and corporate restructures, tax issues are complex and the amounts at risk are large. Inland Revenue is therefore increasing audits of multinationals and corporate restructures. 

We know there are around 7 million cryptoasset transactions, worth nearly $8 billion, by 227,000 New Zealanders. 

We’re seeing significant under-reporting of income from some of these people. 

Inland Revenue will be progressively approaching these traders to let them know some of the information we have on their business and giving them a final chance to report their income. 

What’s important now

Peter Mersi wants to “encourage people who have a tax debt to talk to us early to avoid harsher outcomes. 

“We have a range of options to support customers to get back on track and to meet their obligations. For example, people can set up instalment arrangements to pay off their debt over time in manageable amounts, reducing the likelihood of incurring late payment fees. 

“At the end of May this year there were just under 90,000 active arrangements across all tax types. 

“We also encourage voluntary disclosures. A voluntary disclosure is when a customer reaches out to Inland Revenue, letting us know they’ve made a mistake on their tax return before we find out in some other way,” Peter Mersi says.