IRD in 'cashies' crackdown

Inland Revenue Department is shown here as a barrier arm on fringe benefit tax. It wants unstated taxable income on ...
Al Nisbet

Inland Revenue Department is shown here as a barrier arm on fringe benefit tax. It wants unstated taxable income on residential housing jobs too

Inland Revenue Department has tagged four parts of Auckland for a 'cashies' tax crackdown that could turn into a national campaign.

The tax-gatherer has started using radio, community newspapers, mobile ads and bus-stop signage for a message to residential sub-contractors in the suburbs : pay your full lump of income tax or be punished.

IRD marketing and communications group manager Andrew Stott said the ads had been targeted at sub-contractors on residential housing in the Auckland suburbs of Flatbush, Takanini, Silverdale and Albany.

The messages would double as a prompt for anyone to report cash deals and other types of non-taxed contracting and IRD would "definitely" look at other direct tax appeals around the country if the Auckland trial went well, Stott said.

He said this was the first time IRD had run a direct, public appeal for people to pay their income tax, or targeted specific areas or industries. IRD had not named the Auckland suburbs in its cashies advertising but it wanted sub contractors working in these areas to notice.

A less specific radio ad heard in Christchurch on Monday featured common "tradie" transactions paid for in cash. Each case was taxable, the ad said. Stott agreed the IRD ads had a moral dimension similar to other "it's not okay" campaigns on social issues.

The campaign aimed at the Auckland suburbs was a "small, trial campaign" and a "first little look" at another way to enforce tax rules.

It had originated with trade bodies including Master Builders Federation contacting the IRD with its members' concerns about non-declared, under-the-table contractors.

The IRD had evidence for an income-tax gap in its named Auckland areas, where there had been a surge in residential sub contracting, Stott said.

By the nature of cash jobs it was  "impossible" for IRD to know how much tax it was owed in the Auckland suburbs, nor could it know what it was owed nationally. IRD had not been given any directive from central government to increase its collection of taxable income, Stott said.

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New Zealand is part of an international group trying to make more small to medium enterprises tax compliant.

Tax officials reporting to the Organisation for Economic Co-Operation and Development (OECD) in 2012 said the kind of unpaid tax in New Zealand was characterised by "both monetary and non-monetary transactions that are not declared; including barter or cash, not filing, under-reporting, inflating expenses, income from illegal activities and deliberate fraud".

The OECD's report in January 2012 highlighted global attempts to deal with hidden, non-taxed e-payments, in particular.

Part of the global tax problem was an explosion in the use of the internet and related electronic payment systems (EPS) like prepaid credit and debit cards, internet payment services and mobile phone payments systems, the OECD said.

Businesses and individuals now had many more opportunities to conceal income from "underground activities in both domestic and offshore locations", the report said.

"On a positive note, the use of EPS also creates electronic records that could prove to be a significant source of intelligence for revenue bodies on unreported business proceeds."

IRD told the OECD it had been negotiating Tax Information Exchange Agreements (IEAs) with offshore finance centres which would enable the department "to obtain even more details of offshore accounts and assets of New Zealanders".

It had finalised about 15 IEAs when reporting three years ago. At the same time IRD said it had a public communications strategy in place to inform the public they held a particular type of 3rd-party data, like Paypal accounts and/or bank data.

IRD was not able to immediately update its work with the OECD on electronic tax transactions.

 - BusinessDay

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