OPINION: The Inland Revenue Department will shortly issue an operational statement on taxpayers' obligations and Inland Revenue's powers, writes Murray McClennan in Taxing Times.
Inland Revenue's search and seizure powers are very wide and generally are wider than the police and other Crown agencies. Indeed, several other Crown agencies are envious of Inland Revenue's wide-sweeping powers.
In terms of section 16 of the Tax Administration Act, Inland Revenue has the right to: Arrive unannounced and search business premises without a warrant and copy documents. Search a private dwelling and take away documents, provided either a warrant has been issued or the occupier grants entry. Bring locksmiths, police and other specialists to assist in the search process.
The inspection should be: Necessary or relevant for the collecting of any tax or duty imposed under any of the Inland Revenue laws or carrying out any other function lawfully conferred on the commissioner. Likely to provide any information, including computer hard drives, required for the purpose of any of those laws or functions.
These powers are not used frequently; there were about 40 such searches in 2012.
Searches of taxpayer premises can provide considerable useful material for Inland Revenue.
Some documents may be subject to privilege, such as a tax advice document. However, the circumstances surrounding the creation of the document must be disclosed.
Taxpayers must co-operate with reasonable requests such as providing computer passwords. Last year a taxpayer was convicted of deliberately obstructing Inland Revenue officers by not providing access to hard drives.
The taxpayer's husband was also convicted of aiding and abetting the obstruction; both were fined $15,000.
If you are present at a search by Inland Revenue, you must co-operate and not obstruct. It may be prudent to seek specialist advice as soon as Inland Revenue arrive.
» Murray McClennan is director of Tax Central Ltd, a specialist tax consulting firm.
- The Southland Times