Committee Of Experts' Tax RecommendationsRevenue
Released With Initial Proposals For Government Action
The Government today released the Committee of Experts' report on tax compliance and the system's robustness against evasion and avoidance, along with decisions already taken by Government on those recommendations. The 338-page report, released by Treasurer Bill Birch and Revenue Minister Bill English, is the result of nine months' work by a four-man committee, which was chaired by the Rt Hon Sir Ian McKay.
The Ministers said the New Zealand tax system had been highly praised by the OECD as among the least distortionary in the world.
"The Government is determined to ensure it remains at the leading edge of tax policy and administration," they said.
"To that end, the committee was given wide-ranging terms of reference. Their report tackles many difficult issues, and makes a large number of recommendations. The Government is impressed with its scope and quality. "We are also pleased to be able to indicate, in releasing it, how the Government intends to respond to the committee's recommendations, to ensure timely consideration and appropriate action," the Ministers said. "This is a valuable report reinforcing themes basic to Government tax policy. It endorses, for example, maintaining a broad-base low-rate tax policy in order to restrict the conditions that make tax avoidance possible." Key recommendations in the committee's report include:
Government should consider halving the monthly penalty for late payment of tax.
The most sensible way to reduce tax avoidance is to target the conditions that make tax arbitrage possible by broadening the tax base and lowering the variability of tax rates.
Inland Revenue should continually identify opportunities for evasion, develop strong community awareness of tax evasion, and review and communicate the law on non-cash transactions. It should also ensure it maintains the necessary expertise to combat evasion.
taxpayer secrecy provisions under which Inland Revenue operates should be relaxed to enable the department to disclose taxpayers' affairs when that is necessary to protect the integrity of the tax system.
The business income of charities should be taxable if it is unrelated to the purpose of the charity, and the income of all but small amateur sports-bodies should also be taxable.
The Government should re-consider the status of loss attributing qualifying companies which can be used for tax avoidance.
The Ministers said the Government would now ensure that the full range of the committee's recommendations are systematically considered. "Policy recommendations will, as usual, be subjected to full public consultation, in keeping with the Government's tax policy-making process," they said.
"The Government will work through the recommendations as follows:
Recommendations for reducing compliance costs will be considered as part of the Government's project on simplifying the tax system for small business taxpayers, on which a discussion document is due to be released later this year.
The Inland Revenue Department will report to the Government by the end of May on recommendations relating to the operation of the department.
Recommendations on the taxation of charities and amateur sports-bodies will be included in the Government's tax policy work programme, but the issues involved are complex, and need careful consideration. Since the tax policy work programme is fully committed to other priorities in the current year, those recommendations will not be considered in the short term.
Recommendations on the progressive rewriting of the Income Tax Act will be referred for comment to the panel of specialists advising on the Rewrite Project.
The Government, in the case of all the committee's tax policy recommendations other than those in the preceding four paragraphs, invites public submissions in line with its generic tax policy process.
Areas in which submissions are being sought range from the late payment penalty, for example, to the taxation of restraint of trade and lease inducement payments.
The committee's report, Tax Compliance, is available at Bennetts Government Bookshops and on the Government Website at ww.executive.govt.nz/compliance, the Ministers said.
Submissions on Committee of Experts Recommendations
Public submissions are sought, in line with the Government's generic tax policy process, on tax policy recommendations by the Committee of Exports which very broadly cover these areas:
Taxation of restraint of trade and lease inducement payments
Taxation of sick, accident and death benefit funds
Depreciation of low value assets
The general anti-avoidance rule in the Income Tax Act
Loss attributing qualifying companies
Disclosure of information to the Inland Revenue Department
The information gathering powers of the Inland Revenue Department
Legal professional privilege
Onus of proof in civil proceedings
Withholding Payments Regulations
The late payment penalty
Recovery of unpaid company tax from shareholders and directors
The tax implications of electronic commerce
Inland Revenue Department's response to publicity.
The particular recommendations that the Government seeks submissions on are set out in these paragraphs in the Committee's report: 2.200, 3.4, 3.42, 4.15, 5.7, 5.31, 5.72, 5.78, 5.88, 5.94, 5.103, 5.108, 5.118, 5.120, 6.37, 6.53, 6.114, 7.55, 7.56, 8.4, 8.27, 8.33, 9.35, 9.63, 10.8, 10.13, 11.28, 11.37, 11.43, 11.52, 12.7, 12.9, 14.35, 15.11, 15.14, 16.41.
Submissions should be made by 30 April 1999 and addressed to:
Submissions on Committee of Experts on Tax Compliance
C/- General Manager
Policy Advice Division
Inland Revenue Department
PO Box 2198