IRD damaging system with approach to tax disputes - KPMG

Inland Revenue and its advisers are using tortuous tactics in key disputes with business that will ultimately damage the country's voluntary compliance based tax system, an accountancy firm says.

KPMG takes the example of conduit tax cases between banks and Inland Revenue, in which as much as $2.1 billion is in dispute.

"The tactics employed by Inland Revenue in the procedural disputes raise concerns, ultimately, for the integrity of the tax system," KPMG said in its latest Financial Institutions Performance Survey.

Tax payers and their advisers are taking a more jaundiced and adversarial approach as a result and this can not be good for the tax system.

KPMG said it has seen Inland Revenue argue that its own adjudication unit is not fit for the purpose for which it is designed. This allows Inland Revenue to bypass its own adjudication process. Inland Revenue and its advisers have sought to have confidential advice to clients from accountants revealed in the court discovery process.

And, Inland Revenue has argued its own policy advice and public statements are not relevant to a tax dispute.

"In their determination to establish that the avoidance line has been crossed by the banks, Inland Revenue and its advisers have created a real cynicism about the approach of Inland Revenue.

"The tactics employed to win the battle may mean Inland Revenue loses the voluntary compliance war," KPMG said.

- NZPA