IRD slammed for keeping tax report secret, as frustration builds at complex tax rules

IRD has refused to release a report into the quality of its tax laws, sparking calls from former IRD deputy commissioner Robin Oliver for it to come clean, saying the department had little reason to keep the report secret.

Oliver said there had been "lots of complaints" about recent tax legislation and that the tax profession was "fed up with highly complex rules - turgid stuff that goes on for pages and pages".

The IRD is the only part of the Government that drafts its own laws. Other agencies get legislation drafted by the Parliamentary Counsel Office.

In 2019, IRD commissioned a report into the "approach adopted to taxation law drafting" by IRD's drafting unit. That report, including recommendations, was finally delivered to the IRD in June 2021.

IRD said many drafting principles for tax legislation were developed 30 years ago, and in 2019 it was thought timely to review them.

A request for a copy made by the NZ Herald under the Official Information Act was refused. This was in part because the Tax Administration Act allows the IRD to refuse the release of information that would undermine the integrity of the tax system

A letter from the IRD refusing the request said, "the Commissioner is not required to disclose any item of revenue information if the release of the information would adversely affect the integrity of the tax system or would prejudice the maintenance of the law."

The letter said the review's findings would "be made public in due course".

Oliver disagreed with the IRD's grounds for refusing to release the report.

"To assert that the Tax Administration Act takes precedence over the Official Information Act seems like quite a big call. They're more or less saying that IRD is exempt from the Official Information Act," Oliver said.

Oliver said there had been persistent complaints about the quality of tax legislation under Labour and National governments, which had led to "private sector annoyance" at things like compliance costs.

Much of that frustration was at the way IRD was implementing international rules like Base Erosion and Profit Shifting (BEPS) legislation, which aimed to ensure large corporations were paying the right amount of tax.

"The BEPS stuff was designed for Microsoft and Google, but it has to be applied by the corner dairy," Oliver said.

"There's lots of frustration on that. That is being taken out at the drafting unit," he said.

Deloitte tax partner Robyn Walker agreed that the complexity of tax legislation had been causing problems.

Walker said some of the problems with the legislation was the approach to tax policy that tried to have a solution for every kind of tax situation a taxpayer might find themselves in.

"It becomes overly complicated trying to deal with every situation. It just becomes quite unwieldy and unnecessarily complicated," she said.

"The drafters are in an awkward position because they have to draft in accordance with the policy, even if the policy is overly complicated," she said.

Walker said there was plenty of evidence of areas where overly complicated tax laws were causing problems, from the IRD's faulty tax calculator, which appeared to misunderstand the IRD's own tax rules, to the draft legislation for the Government's residential loss ring-fencing last term.

In that case, the legislation had to be almost completely rewritten at select committee.

"They had to be removed from the bill and completely rewritten because they were impossible to read and understand," Walker said.

IRD's refusal to release the report has been appealed to the Ombudsman. IRD declined to comment.