22 May 2015

Minister welcomes $74 million for tax compliance

Budget 2015 continues the Government’s investment in ensuring fairness in the tax system by pursuing those attempting to avoid paying tax, Revenue Minister Todd McClay says.

Budget details announced yesterday include a further Budget allocation of $74 million over five years for Inland Revenue’s investigations activity.

“As announced earlier this week, $29 million of that extra funding will be used to increase property speculation,” says Mr McClay.

He says the remainder of the funding, some $45 million, will be devoted to tackling the hidden economy (25.4 million) and the tax issues of aggressive tax planning (19.6 million)..

Taken together, the return on investment for this extra funding is expected to yield 8 dollars for every dollar spent.

“This follows Budget funding provided over several years focused on improving tax compliance and which is helping to make sure that there are fewer and fewer opportunities for people to avoid paying their fair share of tax” Mr McClay says

He says that the Budget allocation includes an additional three years of funding to continue work funded through Budget 2012.

“In 2012, Inland Revenue was provided with an extra $98 million over five years to scale up its successful tax compliance activities in dealing with the hidden economy, debt collection, and following up on unfiled returns. It’s been a very successful investment. Continuation of this funding beyond 2016/17 will give additional revenue of $113 million for an annual cost of $20 million.

“The hidden economy work targets certain ‘at risk’ industries while aggressive tax planning encompasses international issues such as transfer pricing which is a significant issue for New Zealand and globally.

“When individuals or businesses don’t pay their fair share of tax they’re cheating those who are doing the right thing and expecting others to pay their way. There may be a number of reasons why people fail to engage with the tax system and meet their obligations.

But by participating in the hidden economy, their activity poses real risks to the tax system and consequently to our economy.

“Taxes help pay for all the government services and functions that we all use and value. If people don’t pay their tax, this has a direct negative effect on the economy. By far most people in New Zealand do the right thing and pay their tax, but some sectors of society will always try to find a way to avoid paying which means that others have to pick up the bill” says Mr McClay.

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