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New Zealand Taxation Bill Approved

by Mary Swire,, Hong Kong

14 December 2010

The New Zealand Tax Administration and Remedial Matters Bill, introduced in August this year, passed its first reading in parliament on December 10.

The Minister told the House that the key focus of the Bill was on efficiency and on reducing compliance costs. He said:

“Reducing tax compliance costs is something that every government and every Minister talks about, but it is something we have to work at constantly to stimulate the New Zealand economy and to encourage investment."

“One of the measures this bill contains is the abolition of gift duty. I first raised the prospect of the abolition of gift duty in June of this year. Following a consultation process, I am delighted that this bill gives effect to that decision. Gift duty no longer raises any significant revenue, and imposes significant compliance costs on taxpayers. It is well past its use-by date, and I am delighted that the announcement of its pending abolition has already been widely welcomed by taxpayers. Gift duty is a tax that currently produces about NZD1.5m in revenue. It directly costs the Inland Revenue Department about half a million dollars to collect, and is estimated to cost about NZD70 million in compliance costs. Under any reasonable assessment it does not add up, and so its abolition is long overdue."

“The bill makes changes to the tax disputes process, and I am delighted that there has been generally strong support for the proposed changes to the procedural rules that we are making regarding the tax dispute process, along with some administrative changes to the process. The Inland Revenue Department manages this system through a process of significant public consultation and dialogue with key stakeholders in the matter, and I am confident that the measures contained in this bill will make for a more streamlined process for all concerned."

"The bill introduces changes to the tax administration rules to relax secrecy provisions under specific criteria. The changes being contemplated in this legislation will provide better value for money across the Public Service, with improved speed, accuracy, and certainty of information through wider use of Inland Revenue Department information. Currently the tax secrecy provisions are so tight that they actually prevent the Inland Revenue Department providing better customer service. Providing the Inland Revenue Department with greater ability to provide information will enable us to improve efficiency in the Public Service, provide a better customer service, and efficiently operate the tax system. This bill introduces measures that give effect to all those requirements."

“Changes to the tax information-sharing and secrecy provisions in the bill will allow the Inland Revenue Department to share information with other Government agencies for specific purposes and under specific criteria – for example, to prevent abuse of the social assistance system.

“Under the current rules, it is unclear whether the Inland Revenue Department can accept the assistance of a relative or a friend helping a taxpayer who is a non-English speaker or who has hearing difficulties, even if the taxpayer has given his or her permission to be helped. This bill seeks to tidy up those sorts of anomalies. The tax system fundamentally relies on the ability of taxpayers to trust the Inland Revenue Department with the information they provide."

“The changes to the secrecy provisions are, therefore, being proposed only under very carefully prescribed criteria. In addition, the bill clarifies the use of money interest rules that apply to underpayments of tax to retrospectively give taxpayers greater certainty that this interest is, in fact, deductible for income tax purposes."

“The remaining items in the bill such as enhancements to the tax pooling rules and technical changes to the portfolio investment entity rules are mainly remedial in nature to ensure that those respective rules work as intended”.

TAGS: compliance | tax | investment | tax compliance | legislation | gift tax | New Zealand

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