Taxpayers face greater uncertainty

Media Release. Ernst & Young. 22 June 2011.

Taxpayers face greater uncertainty

A controversial change included in Inland Revenue’s latest Tax Administration and Remedial Matters Bill, which is on its way to receive approval, will have a major impact on Taxpayers’ rights. The Bill removes the right to opt out of the formalised and costly tax disputes process in favour of a review by the judiciary.

This change was included despite rather impassioned submissions against it from tax experts and it could be argued that the battle is lost.

But Ernst & Young Tax Partner Jo Doolan is encouraging taxpayers not to take a defeatist attitude.

The life line for taxpayers is hidden in the Officials Report and confirms that Revenue Minister Hon Peter Dunne wants to try the new system for two years and a review will be undertaken. This means taxpayers need to be very vocal in letting the Minister know every time the system is not working for them.

Doolan adds the current tax climate could hardly be described as taxpayer friendly, with the cost benefit of tax disputes often forcing taxpayers to concede to tax positions that are not considered technically correct.

While the pursuit of tax dollars is the mandate given to the Inland Revenue by the Government, there is a point where taxpayers may feel the integrity of the tax system is undermined and may work against our system of voluntary compliance.

Kirsty Keating, leader of Ernst & Young's Tax Controversy Practice, says taxpayers will need to engage a tax expert for advice at a very early stage if there is a dispute. The impact of the new rules will mean a real limitation on a taxpayer's right to access the Court as the taxpayer will have to ask the party they are having the dispute with, the Commissioner, for permission to have the matter considered by an impartial Court, rather than Inland Revenue's own Adjudication Unit, if the Bill is passed.

Given the appearance of the tax system being fair, the removal of this taxpayer right will need to be very carefully managed.

“In this time of desperate need for growth in tax dollars,” says Doolan. “Our focus needs to be on economic growth, not on squeezing the last piece of tooth paste from the tube.”

ENDS

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