Days of never having to deal with IRD may be drawing to a close

Inland Revenue has argued the current system requires people to "make a gamble" about whether to contact the taxman.
MAARTEN HOLL/FAIRFAX NZ

Inland Revenue has argued the current system requires people to "make a gamble" about whether to contact the taxman.

Consultations are expected to kick off in the next few days on a big shake-up to the personal tax system.

Inland Revenue suggested in 2015 introducing a new requirement for all Kiwis to check and confirm an online statement once a year, to ensure they did not have income that had missed the taxman.

That would end a situation where some regular wage-earners have not had to have any dealings with the tax department since universal tax returns were abandoned in the 1990s.

Taxpayers Union executive director Jordan Williams fears an extra hassle for taxpayers.
CAMERON BURNELL/FAIRFAX NZ

Taxpayers Union executive director Jordan Williams fears an extra hassle for taxpayers.

The possible new requirement may be one of the rule changes canvassed in a discussion document about to be released by Revenue Minister Judith Collins.  

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The department has been concerned taxpayers are "cherry-picking" by filing a tax return or requesting a personal tax summary in years when they think they are due a tax refund, but not doing so when that might mean they had additional tax to pay. 

It has argued that making people look over an annual statement would restore fairness to the tax system and stop people being "forced into a gamble" over whether to request a tax summary.

But it is not clear Inland Revenue will get its way.

Former revenue minister Michael Woodhouse said last year that it could not be assumed mandatory checks of personal tax summaries would go ahead.

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Taxpayers Union executive director Jordan Williams said that if it did, it would be a "backwards to the 1970s". 

"We're calling on political parties across the spectrum to rule out universal tax return filing as part of their election manifestos," he said. 

"Officials may like it, but the political consensus on New Zealand having a low compliance cost regime should be closely guarded. That's certainly what our members will be fighting for."

Inland Revenue has maintained that any requirement to check a tax summary would not be like filing a tax return, as for the "vast majority" of taxpayers no action would be required other than looking at a pre-filled form.

The proposed summaries should be much more accurate than those sent out at present, as a result of a new computer system being introduced as a result of Inland Revenue's Business Transformation project.

That project will mean other big changes for personal tax that are likely to be canvassed in the discussion paper.

Inland Revenue should get a better handle on what people have earned and been taxed throughout the year, allowing it to vary deductions to minimise the need for large tax refunds or tax demands at the end of the year.

That is likely to mean less demand for the services of commercial tax refund businesses.

Inland Revenue has previously announced similar changes for business tax which are switching to more of a PAYE regime. 

A spokeswoman for Collins said on Wednesday that a consultation paper was likely to be released shortly but the exact date had yet to be confirmed.

 - Stuff

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