Kiwis could be forced to surrender their private details to United States authorities as part of a deal to combat tax-dodging.
Those affected could include high-profile New Zealanders in entertainment, sports and business who have previously lived in the US.
The Government has stressed the law changes to override New Zealanders' privacy protections will affect only expat Americans.
However, Inland Revenue has confirmed it could include collecting and passing on the private details of New Zealand citizens to US tax authorities.
The move is part of the US' controversial global push to catch tax dodgers, known as Fatca, by requiring all banks and financial institutions to supply US tax authorities with account details of "US persons". Many countries, including Britain, have reached deals similar to the one between the US and New Zealand.
But critics say the law will hit Kiwi citizens, many of whom are oblivious of their status and tax obligations as a "US person".
Under US law, any Kiwi who has a green card, or US residency, is liable to pay tax in the US, even if they have not lived there for decades. Likewise, any New Zealander born to an American parent is a default US citizen and required to pay tax there, even if they have never left New Zealand.
In both cases, Kiwi citizens living in New Zealand can be treated as "US persons" for tax purposes and could be fined as much as US$10,000 a year for not filing a US tax return, with ignorance no defence. "[It] is not just about people who are avoiding taxes . . . rather, it is an NSA-style data dragnet," former US diplomat and anti-Fatca campaigner Jim Jatras said.
Under the pending tax deal, IRD will start collecting private information about "US persons" from banks and passing them on to US tax authorities from July this year.
Inland Revenue has said it does not know how many New Zealanders would be covered by the deal, and banks have estimated the group would be small.
But for those who are covered, the US Government would gain access to their bank account numbers, withdrawal history, balance, and even home addresses.
Several people have spoken out against the privacy law changes that will allow the tax deal to proceed. Simon Titheridge, of Wellington, is a New Zealand citizen born and bred, married to a US citizen. Their 11-month-old daughter, Violet, was born in New Zealand but is also a US citizen, through her mother.
He told a parliamentary select committee it was discriminatory for banks to hand over the family's private details to US authorities based on foreign tax laws. "My family live in New Zealand and planned to for the rest of our lives," he said.
"If this bill passes . . . we face having our information, our personal details, passed on to a foreign government."
Other New Zealanders who spoke to The Dominion Post said they feared US tax authorities would use the information to track them down and hound them for tax-filing errors.
Some even claimed to have renounced US citizenship to avoid the cost and risk of complying with US tax law.
Inland Revenue has declined to comment further while a deal with the US was still being discussed and the law changes were before Parliament. A spokesperson for Revenue Minister Todd McClay said it would not be appropriate to comment on another country's jurisdiction.
- The Dominion Post