Tax changes to affect 'everyone'

Everyone will be affected by an unprecedented overhaul of the tax system, Revenue Minister Todd McClay says.

All New Zealanders may once again be required to have some contact with the Inland Revenue Department each year under proposals set out in a discussion document on Tuesday.

Some wage earners in steady jobs may not have had to have any dealings with the tax department since a rule change in the 1990s did away with the need for most people to file tax returns.

But that could change with the completion of Inland Revenue's $1 billion-plus Business Transformation project, according to a discussion paper released by McClay and Finance Minister Bill English.

The paper proposes all New Zealanders might need to check and confirm an online statement to ensure they did not have income that had missed the taxman. For the "vast majority" no other action would be needed, the department said.

It is not yet clear how Inland Revenue would cater for people who did not have access to the internet. However, another discussion paper on digital services said internet kiosks could be one way people could deal with the department.

READ MORE: 'PAYE' plan for company tax

Inland Revenue said some people were currently "cherry-picking" by filing a tax return or requesting a personal tax summary in years when they thought they were due a tax refund, and not doing so when that might mean they had additional tax to pay.

In 2012, 38 per cent of taxpayers - or 1.6 million people - chose not to request an end-of-year check. Inland Revenue said 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.

The change runs counter to the main thrust of the transformation project, which is it to make it simpler for people and businesses to comply with the tax system by helping Inland Revenue deduct the right amount of tax from salaries, dividends and profits through the year.

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A new computer system will let Inland Revenue get more of a "real time" view of the income people and businesses receive and the tax they pay. That should mean fewer and smaller tax bills and refunds at the end of the year.

Inland Revenue estimated in 2012 that its Business Transformation programme would cost between $1b and $1.5b and would take 10 years to complete. But McClay said this was the first time the Government had been able to say what it could deliver.

"Bringing everybody back into the system" would become possible because of the better information Inland Revenue would have, he said.

Tax refunds could be automatically paid to people's bank accounts at the end of the year. If there was tax to pay, Inland Revenue could "potentially" automatically collect it by increasing the tax it took from people's future savings and investment income.

The changes would impact tax refund companies which help people claim tax refunds from Inland Revenue. But even if the refund business dried up, McClay said there would be opportunities for the tax advisory profession to offer people advice.

Submissions on the proposals close on May 29, but no changes will kick in soon given the transformation programme is expected to take several more years to complete.

 - Stuff

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