IRD names tax-dodge targets

Photo / Herald on Sunday

Online traders, property speculators and tax agents behind in their personal tax are among those who can expect the Inland Revenue's steely gaze in the coming year.

For the first time the IRD has issued details of the areas of tax compliance it intends to focus on in the next 12 months.

Collection of tax from businesses struggling to keep up with their commitments will be a priority.

Other areas of activity the taxman plans to keep in his sights include the "hidden economy" - jobs done under the table for cash or goods - GST fraud, exaggerated tax losses and unpaid child support.

Commissioner of Inland Revenue Bob Russell said the department increasingly wanted to find ways other than traditional enforcement to encourage payment of tax, and hoped getting out the message about areas of interest would help. "We think this is one more thing we can do to make it easier for New Zealanders to comply."

Martin Scott, group manager assurance for the IRD, said research and experience showed that in difficult economic times there was more fraud and tax evasion.

Consequently small business could expect a spotlight on areas such as undeclared income and GST fraud. The department was revamping its screening processes for GST refunds, he said.

It was also redeploying staff towards collecting tax debt from business - organisations could expect a phone call from the IRD earlier in the piece.

Online trading would continue to be a focus, and the department would be contacting traders it identified as making significant online sales.

The IRD had already analysed the sales of three million people online, matching the data with their tax returns. In some cases people were audited immediately and prosecutions had resulted, he said.

For the past four years the IRD had turned its attention to those buying and selling property for profit, and had gathered an additional $100 million a year in tax as a result, Scott said. "We are continuing our audits in this area."

It was currently dealing with a speculator who had sold 700 properties.

"New information coming out is we're finding a number of people are filing GST returns, claiming their GST refunds, but we can find no income tax returns. Our focus is on those people."

Tax agents' personal affairs would also be under scrutiny. Ten per cent of agents had personal tax returns outstanding. "We will be paying particular attention to those over this next period of time," Scott said.

Absent parents who failed to pay child support remained in the gun. There were currently 9500 cases of Kiwi parents owing $20 million in child support which had been referred to the Australian Tax Office, and a further 4000 cases worth around $8 million were about to be referred, he said.

The IRD is looking at new ways parents can pay their child support, such as by credit card.

It has a new information exchange with the Customs Service under which it is notified when defaulting parents travel in and out of the country.

The IRD continued to look for ways to work smarter, Russell said. For example, it was running a pilot project allowing tax agents to set up installment arrangements directly with clients who were behind on their tax.

It was also aiming to get as many services online as possible. "We'd like ultimately to get to where the banks are."

Taxman says 'cash jobs' and internet traders on hit-list

IN THE SPOTLIGHT
* Online trading
* Property speculation
* Unpaid child support
* 'Under the table' jobs
* GST fraud
* Exaggerated tax losses

The tax take
IRD collected $51.2 billion in tax in the 2007-08 year. Of that:
* 45 per cent was PAYE
* 19 per cent was GST
* 18 per cent was company tax