Tax News

This week Inland Revenue reminds tax agents about the bright-line test

23 Nov, 2020 | The Week in Tax

  • This week Inland Revenue reminds tax agents about the bright-line test
  • It responds to comments in a previous podcast about Business Transformation
  • The wealth tax debate continues

Transcript.

About 11 o’clock on Tuesday morning, myself and what appears to be just about every other tax agent in the country received an email from Inland Revenue with the subject line “Clients meeting the bright-line test”.

The email began: “Our records show the following clients have sold or transferred residential properties that meet the bright-line rule. This means these clients will be required to pay income tax on any profit they have made on the sale of the property.”

The email then set out the clients it believed were caught by the bright-line test rules. That is, they either sold property within two years of it being bought between 1st October 2015, and 28th March 2018 inclusive or within five years of it being bought on or after 29th March 2018.

Now readers and listeners will know that I have previously stated that we are aware that Inland Revenue has been gathering data in relation to the bright-line test. But this is the first time it’s really flexed its muscles and its capability to show exactly what it knows about what’s going on. And an insight into why Inland Revenue did that came the following Wednesday morning, when Stuff published a story under the banner headline “One in four property speculators dodging housing tax”.

Based on Inland Revenue data the story outlined that of 1701 property sales subject to bright-line test in the 2019 income year, 1285 have paid up and complied, but Inland Revenue is looking at the other 416 taxpayers who appear not to have complied with the law. It’s also looking at a further 3,758 sales for that year, where the bright-line test might apply.

This email initiative, as you might imagine, caused quite a bit of a stir amongst the tax agent community, and we know that all accountants from small companies like ourselves to major Big Four firms received these letters for their clients. Although the emails set out the client Inland Revenue believed was caught by the rules, they weren’t any more specific than that.

This upset a few accountants because it means digging around to find out what’s going on here. It also transpires that Inland Revenue may have been a little premature in its information release. Apparently, there is a follow up email coming next week, which will actually set out the address of the property in question so that we can then more accurately work out what’s going on.

But there was a fairly lively debate about the matter on the Facebook page of the Accountants and Tax Agents Institute of New Zealand of which I’m a member.  And quite a few interesting snippets emerged about who had received emails and why.

Inland Revenue’s systems appear to have picked up any change in the registration of title. So that would include obviously sales where the title to the property passed to a new owner. But it also appears to have included changes in trustees because contrary to what a common misconception, trusts don’t actually exist in law although they have a separate existence for tax purposes. But in law, the property is held by the trustees. So if you have individual trustees holding property and one retires, there has to be a change of registration on the title. And Inland Revenue systems have picked up a few of these and issued a “Please explain.” Overall, though, the majority of tax agents were reasonably happy that this was the sort of initiative that Inland Revenue should be doing.

I’ve said before that Inland Revenue has access to a lot of data but doesn’t really make people aware of just what it knows. And these bright-line test emails are an example of it using the information it holds and making people aware of their obligations.  One or two accountants noted it was interesting to see a sale by that client because they never mentioned it to us. There was one particular case, I recall, where the client went ahead and did something which they thought would be outside of the bright-line test, but in fact the transaction was caught.  He was most crestfallen when he eventually spoke to me about the matter and I explained how the rules operated.

So this email initiative is the sort of thing that we can expect to see Inland Revenue doing more of and we can expect it to be fine tuning how it does these information releases. Yes, in some cases, such as those where there’s just merely been a change of trustee, Inland Revenue has jumped the gun. Perhaps a little bit more thought around whether that particular transaction was caught would have saved some headaches and frantic calls between clients and accountants on the matter.

But when you consider the heat in the housing market and concerns everywhere amongst those locked out of the housing market and the desire for the government to raise revenue to fill the hole blown in its balance sheet by the Covid-19, it’s not surprising Inland Revenue will be taking this initiative.  It reminds people, “Hey, these are the rules. We think you’re caught. If not, please explain”. So, in summary, I think we’ll see more of these initiatives further down the track

By the way, as a PR exercise, it does no harm. Firstly, it tells the new minister that it’s on top of things and secondly, reminds those who think that Inland Revenue is big and dumb, that in fact, it has got access to a lot of information. And to borrow a line from Liam Neeson, it will find you and will, if not kill you, certainly tax you.

Communicating in public

Moving on, a couple of weeks back, myself and Andrea Black took a look at Inland Revenue Business Transformation programme, and we weren’t terribly happy about some of what we found.

Well, on Tuesday, Sharon Thompson, Deputy Commissioner for Community Compliance Services, published a piece responding to our podcast.

And in particular, she addressed our suggestion the transformation hasn’t been successful because cost savings haven’t been reinvested into audit and investigation work. This was, “a narrow view of how Inland Revenue ensures tax revenue in New Zealand is as close as possible to what is required under our laws”. And our view that Inland Revenue’s current approach was incorrect is not supported by international research.

I think the phrase is “Shots fired!”, but it’s certainly intriguing to hear the Deputy Commissioner’s response. One of the points she made in responding to the specific questions we raised about the level of spending on investigations and debt management, was “Our new system has dramatically increased and improved the data we have access to. And we can watch, often in real time, as taxpayers file returns. So, if they’re getting it wrong, accidentally or deliberately, we can see and intervene, reducing the need for post-return audit and investigation.”

That is something I’ve heard from other Inland Revenue staff.  If you file a tax return through the Inland Revenue portal, the system tracks the keystrokes. And in one example given to me last year by an Inland Revenue officer, if there is a suspiciously large number of adjustments being made to get the just right amount, they will look into it.

Sharon goes on to comment that every return that can generate a refund is checked automatically and amended returns are checked and screened. For example, between 1st July 2019 and 30th June 2020, Inland Revenue identified approximately 23,000 returns across all tax types which had errors or it believed were fraudulent with a value of just under $200 million. Now, that’s a good initiative and Andrea and I would not dispute that was a good result and also a good use of Inland Revenue resources.

The initiative I talked about a few minutes ago is something we would welcome, and we should expect to see that.  Tax agents are actually Inland Revenue eyes and ears and so we do a lot of the pre-screening that Inland Revenue would otherwise have to do without us.

But we don’t always get access to Inland Revenue as easily as we should. The phone line for tax agents was abruptly turned off and then reinstated, but with limited hours, for example. So although Inland Revenue may feel that Andrea and I were unfair in some of our criticism, but equally, some of the criticism we raised still needs to be addressed.

The role of tax agents is one where tax agents have a great deal of concerns about what Inland Revenue expects and whether, in fact, it wants to work with tax agents going forward. My belief is Inland Revenue does, but it’s not communicating that very clearly to us at the moment.

I still feel that the dramatic fall in investigation hours of almost two thirds over the last five years is a matter for concern. But we will be able to see how Inland Revenue has worked through the Business Transformation process and see more of the numbers when its annual report is published shortly. It’s been delayed, apparently in part down to the Covid-19 outbreak.

Tax on wealth vs tax on work

And finally, the debate around taxation and housing and wealth taxes continues to rage all week. On Tuesday, Westpac published its Economic Overview for November,  in which it made the point that future governments will be forced to either reduce spending or increase taxes because of the fiscal pressures that are starting to build over superannuation and health care.

The Report goes on.

“The required adjustments to our fiscal position can’t be delayed forever. Sooner or later, some form of consolidation will be necessary, though the precise form this takes will depend on which party is leading the government at the time.  Our pick is that a future government will introduce some form of tax on assets such as a land tax, capital gains tax or a wealth tax. Societal concern about increasing wealth and inequality is only going to intensify, eventually creating a large constituency for such a tax. And tax experts agree that broadening the tax base would enhance economic efficiency.”

Later that afternoon, I spoke to Wallace Chapman on Radio New Zealand’s The Panel about this report and the ins and outs of a wealth tax. And in addressing the housing crisis, I made the suggestion that maybe a 10% stamp duty might be imposed on all investors or some measure like that.

Now, last week, I mentioned a Deutsche Bank report which suggested a working from home tax which unsurprisingly got pooh poohed. But the full report is actually quite interesting and actually has one of the more dramatic report openings to any bank report I’ve seen in a long time:

“To save capitalism, we must help the young. Democratic capitalism is under threat as increasing numbers of young people view the system as rigged against them. The pandemic has only exacerbated their economic disadvantage.”

Now, that’s quite an opening for any report, let alone something from a bank, but the report goes on to talk further about some tax changes and these proposals mirror what was suggested by Westpac. Deutsche Bank suggests that, for example, there is a need to have a tax on a primary residence, which if you think about the hoo-ha we had with the idea of a proposed capital gains tax taxing everything except the primary residence last year, you can imagine just how big a fight would happen if we said actually, “We’re taxing the main home as well.”

The Report also suggested that there may need to be additional taxes on financial assets such as stocks, bonds, due to their gains from loose monetary policy. As maybe people are well aware, stock markets have actually boomed quite substantially this year. New Zealand’s stock market has been hitting record highs recently. The Deutsche Bank report, notes that in the 30 years to 2019, the S&P 500, that’s the main index in the United States, gained over 800%, two thirds more than the return seen in three decades previously. The report suggests taxing such income on a basis similar to our foreign investment fund regime, and or remove exemptions and discounts and capital gains. Picking up my Stamp Duty proposal, the report suggests such duties are paid by the vendor and not, as is common, the purchaser.

Now, the point that the Report makes is the reason why it wants to increase the tax on capital is so as to avoid much higher income taxes, which are often cited as an argument against hard work. This is one of the criticisms of Labour’s proposed tax rate increase to 39%. It is very narrow and hits income earners, whereas there’s a growing consensus that it’s the taxation of capital which needs to be broadened.

So this debate is going on all around the world. When banks like Westpac here and Deutsche Bank in Germany are making comments about broadening the scope of capital taxation you know a fundamental shift is happening in taxation thinking. How that will play out, we’ll have to wait and see, and I’ll bring you developments as we go.

Well, that’s it for this week. Thank you for listening. I’m Terry Baucher and you can find this podcast on my website www.baucher.tax  or wherever you get your regular podcasts. Please continue to send me your feedback and tell your friends and clients.  Until next week, ka kite āno.

What will be in Inland Revenue’s Briefing to Incoming Minister? The challenges ahead for the new Minister of Revenue.

16 Nov, 2020 | The Week in Tax

  • What will be in Inland Revenue’s Briefing to Incoming Minister? The challenges ahead for the new Minister of Revenue.
  • The small business cashflow scheme is extended
  • Should people working from home pay higher taxes?

Transcript

Last week, David Parker was sworn in as the new Minister of Revenue. As part of his transition into his role, Inland Revenue will have prepared a Briefing to Incoming Minister, which introduces him to his portfolio, his role and the department. As the briefing to Stuart Nash in 2017 explained,

This document “sets the scene” to the work we do and how we can support you and outlines the strategic context of our work…As Minister of Revenue, you are accountable for the overall working of New Zealand’s tax system for Inland Revenue as a government department and for protecting the integrity of the tax system. You are also responsible for policy, direction and priorities and decisions on Inland Revenue overall budget.

We are here to help you support you, carry out your ministerial functions and servicing the aims and objects objectives you set. We do this by advising you on policy and strategy, implementing government policy and carrying out day to day functions of the department.

So that’s the top-level view setting out what the respective roles are. And then the document will run through what’s going on within the department and its key priorities. The 2017 briefing to Stuart Nash was rather internally focused, it talked extensively about Inland Revenue Business Transformation programme.

Three years on that’s now largely complete. Although those who listen to last week’s podcast will know that we there are some issues emerging there. So whether that is brought to the minister’s attention, we’ll know in due course when the briefing is released.

But certainly, I would expect other bodies, such as the Chartered Accountants of Australia and New Zealand who, as is traditional, are writing to the Minister of Revenue to say “Congratulations, here are a few things we think you need to look at”, I’m sure they will be raising that point with the new Minister.

Labour’s tax priorities

Now, the document will then talk about what is the immediate government’s priorities, as officials will have read Labour’s manifesto and seen what directions they need to take on tax. So the first cab off the rank will be raising the top tax rate from 33 to 39% on incomes over $180,000. Now, that will require a tax bill, but that’s a relatively straightforward matter and it’s planned to be pushed through before Christmas.

Now, the other policy objective outlined in Labour’s manifesto was work on a digital services tax. And so we can expect Inland Revenue to carry on doing more work on that. This is an interesting space around the world. It seems that governments are hoping that the OECD can come to a resolution on international taxation by mid-2021, but they’re enormously complicated tax issues to work through. And there’s politics involved. And although the United States gets singled out for its lack of cooperation on that matter, they’re not the only country which is raising objections to the OECD’s proposals

What is happening is that instead of waiting for the OECD, some countries such as the United Kingdom and India have jumped the gun and introduced a digital services tax. So that’s something that David Parker and Inland Revenue would consider. I don’t think, as I’ve said previously, they will move forward on it, but I suspect they will do a lot of policy work to have it ready.  They could then implement it if they feel that nothing significant is going to happen with the OECD.

Other pressing matters

But there will be other matters that Inland Revenue and David Parker will need to look at. There’s a tax bill that was going through Parliament before the election. This is the Taxation (Annual Rates for 2021, Feasibility Expenditure and Remedial Matters) Bill. Now that bill will be reactivated and reintroduced into Parliament. The intention would be that it will complete its select committee processes and be enacted some time in March or April next year.

The bill includes an item which has picked up some attention relating to something called purchase price allocation. This is where parties to the sale and purchase of assets can allocate the sale price between them for tax purposes. Now, Inland Revenue has estimated that at the moment, differing allocations of prices between buyers and sellers could mean that the government is going to lose out on over $150 million dollars of revenue between 2021 and 2024.

What’s been happening is some sellers and buyers have been picking differing values for individual parts of the businesses and taking the most advantageous tax position.  This means that the seller and the buyer can probably report very different values for the same items. Now, this has been going on for some time. Inland Revenue has been raising some concerns about it, and the bill is designed to try to tackle that.

There’s a report in Stuff written by Thomas Coughlan, which gives an example where the buyer and seller between them managed to reduce their tax bill by $7 million.

So that’s one of the matters on the agenda for the new minister. It’s worth pointing out that some of what goes on around that price purchase price allocation is driven by the fact we don’t have a capital gains tax.

And that’s going to be a growing issue for the government despite its declaration it’s not going to introduce a capital gains tax because having increased the top tax rate for individuals to 39%, there’s an 11 percentage point differential between the top rate for individuals and the company tax rate. That presents opportunities to try and convert income into capital. This is something Inland Revenue was already concerned about when the gap between the two rates was only five percentage points.

It’s a worldwide issue. I see that the UK Treasury’s Office of Tax Simplification has suggested to the UK government, that it should consider aligning capital gains tax rates more closely with income tax rates.

Currently, capital gains tax rates in the UK top out at 28%, but the top personal tax rate is 45% so you it’s quite a gap.  So the Office of Tax Simplification is suggesting change to discourage taxpayers from trying to disguise income as capital. That’s something that’s always going on in our tax system where if you don’t tax capital gains, the temptation is for people who can to shift assets into the non-taxed category. So those pressures will be there all the time.

And as we highlighted last week, the Department itself seems to have problems with its staff, with low morale. That, again, is something that needs to be addressed. So, David Parker and the new Parliamentary Under-secretary for Revenue, Dr Deborah Russell, will have plenty on their plates as they get into their role.

Doling out interest-free loans…

Moving on, this week, the Government announced changes to the Small Business Cash Flow scheme.

As promised, it has decided to extend the applications for the loan scheme from 31st of December this year, for a further three years, right through to 31 December 2023. The amounts that can be applied for will remain unchanged.

The other couple of changes are potentially a little bit more significant. Currently, no interest is charged if the loan is repaid within one year.  That interest free period will be increased to two years. At the moment the loan can only be used for core operating costs They’re going to broaden this so the loan can be used, for example, on capital expenditure.

Now, all this is really welcome stuff, and it’s a precursor to a more permanent regime, which I would hope has higher lending limits, because as we’ve talked previously, a lot of small businesses are undercapitalised. There was that Inland Revenue report that suggested $10,000 dollars was the point above which taxpayers basically gave up trying to pay tax debt, which suggests that there are some very undercapitalised businesses.

… and then expecting banks to lend more to SMEs

More broadly speaking, the government needs to be putting pressure on the banks to lend more to smaller businesses. I understand that in reports filed with the Australian Stock Exchange about customer engagement and support for banks, small businesses are highly unfavourable in their commentary about the banks’ lending practises. So there’s opportunities in that space.

And the Business Finance Guarantee Scheme, which was intended to help in this space, didn’t actually take off to the degree it could. It was quickly overtaken by the lending on the Small Business Cash Flow scheme. Small businesses are very, very important to the whole economy and enabling them to secure steady finance is a matter for the broader economy, which needs to be addressed.

Taxing working from home

And finally, from the “Maybe not quite such a good idea, but you know what they’re trying to do” ideas box, Deutsche Bank researchers have called for what they call a 5% ‘privilege tax’ on people choosing to work from home. The money would be recycled through to low-income staff.

This is actually come out of a major report Deutsche Bank prepared on rebuilding after Covid-19.  The idea behind the thinking is to compensate for the money that people working from home aren’t spending on lunch breaks. Therefore employees who choose to work from home should pay an extra tax.

The idea is that the tax that could be generated from this should be redistributed to low income workers who cannot carry out their jobs remotely, such as nurses, factory workers and in some cases, retail workers.

Now, the estimate is that a 5% tax could raise US$49 billion a year in the US, €20 billion Euros in Germany and £7 billion in the UK.  The idea won’t go very far, but it’s an example the lateral thinking is starting to happen around the tax base. I think everything is being shaken up and so a decision that may have been taken years ago  that these are the tax settings and we’re not going to change them has to be revisited in the wake of Covid-19 because that’s changed everything.

For example, I think the Government with the pressure of the housing market, might be reflecting on whether, in fact, it was such a good idea to say no capital gains tax for the future.

And on that note, that’s it for this week. Thank you for listening. I’m Terry Baucher and you can find this podcast on my Website www.baucher.tax or wherever you get your podcasts, please send me your feedback and tell your friends and clients until next week, Ka kite āno.

The business transformation project at the Inland Revenue Department

16 Nov, 2020 | The Week in Tax

This week Andrea Black (ex Inland Revenue and Treasury and former independent advisor to the Tax Working Group) and I take a closer look at the impact for Inland Revenue of its Business Transformation programme and find some puzzling discrepancies

Transcript

By Terry Baucher

I’ve previously discussed on a number of occasions the impact of Inland Revenue’s Business Transformation on taxpayers and tax agents. This week we’re going to take a closer look at how Business Transformation has affected Inland Revenue itself. And to discuss this with me, my guest this week is Andrea Black, who when we spoke last year, was then the independent advisor to the Tax Working Group.

Prior to her role with the Tax Working Group, Andrea was at Inland Revenue between 2000 and 2012. During that time, she was involved in the Inland Revenue investigation of the Australian owned banks’ structured finance tax avoidance schemes. This ultimately resulted in the banks paying over one billion dollars in tax and interest.

In 2012 Andrea was seconded to Treasury, a move which then became permanent and she stayed at Treasury until 2015. She then returned to Inland Revenue for a final year.  Andrea is currently the policy director and economist at the New Zealand Council of Trade Unions. This is a role in which she has been working with the Public Service Association who have been supporting Inland Revenue staff during recent restructures

Morena. Andrea, welcome to the show. So, when you were at Treasury and Inland Revenue what was the expectation about Inland Revenue’s Business Transformation?

Andrea Black

The kind of vibe at the time was that it was going to become a knowledge-based agency, smaller, smarter. We could see that our colleagues in processing were likely to lose their jobs, but it looked like they were going to be good processes to support them through that and generally restructure the department.

TB

Was the expectation at that time (2016) that Inland Revenue would lose one third of its staff?

Andrea

To be fair, there was an expectation that there was going to be quite a lot of job losses. But if you thought about it logically, if you were going to have a much flasher computer, you were possibly going to need fewer people. And the old computer system FIRST was honestly held together by bits of wire and there were lots of people doing lots of things to try and hold it all together. So, you could totally see that when things were finished you might not need as many people.

TB

Listeners may find this a bit surprising, but it’s actually quite unusual to sit in an Inland Revenue office and see the terminals they’re using. The only time I’ve done this was way back in 2012 when we were trying to resolve a matter involving transfers of imputation credits. I was shocked at what I saw, because the computer screen I was looking at was something from the 1980s.

The upgrade was well overdue. And what I was hearing was that there was something like 800 people whose role was to reinput data received from tax agents and taxpayers, so it could be serviceable and used elsewhere.

Andrea

You know, that’s right, and then they did these dumps into something called Data Warehouse, which was how the analysis was done. So the High Wealth Individuals work that I led was all done from Data Warehouse. So in my new world there would be a greater use of capital, the labour would become more productive. It was not a surprise, you know, it was an expectation.

TB

But you have been surprised by what’s been happening with staffing, not so much the numbers of staff, but the type of staff who are leaving.  This caught our eye as well, by the way.

Andrea

Yes. We expected that our processing colleagues and some of our colleagues that were holding things together with bits of wire would find themselves without work. And we assumed that there would be processes for dealing with that. We also heard that they were going to have fewer layers and fewer managers. So, the expectation was there would be the types of changes that would be very orthodox and very ordinary. But then there were the changes in May 2017 after I left Inland Revenue.

I started hearing from so many unhappy colleagues. Processing staff seemed to be largely unchanged. But the cuts were falling on the senior technical staff, you know, the senior investigators and the principal advisors, the group I had worked with on the bank tax avoidance cases, and had then gone on to the Frucor case. These senior investigators had their pay being cut and the principal advisers were going to get mixed up with everyone else as technical specialists.

Now, one thing I just want to address is that I’ve heard it said that most people haven’t had a pay cut, and that’s possibly true. But it was the people at the top who were the most impacted. There’s a few things that’s happened. There are very able people who were managers and team leaders who come back as technical specialists. So that’s kind of a plus in the senior investigator and technical space or the principal adviser cohort. On the other hand, I would say possibly half of the senior top talent has left. That’s a lot of talent to lose.

I mean, and I’m sure you’re aware, there was 18 months where my LinkedIn feed was just going ping, ping, ping, with all  my long term friends and colleagues from Inland Revenue, posting that they were now working for themselves or were ow with another agency or now with a big four now or overseas. You would normally have expected a degree of turnover, but it was almost like every day or every well, let’s say every week, I don’t want to exaggerate. And yet  there was another one of these people moving on.

TB

There’s something else that I think is an important point to be made here – that Inland Revenue salaries at that level you’re talking about are actually quite competitive because the Big Four accountancy firms are after people like yourselves and other policy advisors, who are highly experienced people and technically very good. So Inland Revenue has to be competitive.

Andrea

It might not necessarily be the end of the world, because there were really capable technical people who had become team leaders and managers, who came back as technical specialists, so with the remaining people I wouldn’t necessarily be worried or concerned. But there has also been a massive contraction in morale, which I think you’ve alluded to, Terry, in the past with the engagement scores.

TB

Yes, I have been tracking Inland Revenue staff engagement scores. In Inland Revenue’s report to June 2019, it was at 29%, which unbelievably was actually up from the previous year.

Andrea

I did a contract with an agency last year they were at 60% and wanted it to be higher. At my time at Treasury, I think 60% would have been really low.

TB

So Inland Revenue has a problem. Now you’re supporting the Public Service Association.

Andrea

Yes, when I started working with the PSA one thing came to mind, I think it was last year following the Commissioner’s presentation to the Finance and Expenditure Committee. She was being queried about the number of audit hours. She said yes there had been a fall in audit hours, but Inland Revenue was still meeting its return targets. And I remember thinking at the time  “Wow, that’s really impressive.”

But later I got thinking and said to the PSA whether it would be worth finding out about the hours, but also the composition of Inland Revenue’s return.

There’s a lot of talk about how Inland Revenue get seven dollars return for every dollar it receives in audit. And that’s right to a point. But that amount is an identified “discrepancy.” And this discrepancy is a change in tax position.

And if we look at the definition of “tax position” in section 3 of the Tax Administration Act 1994, pretty much anything, any interaction between Inland Revenue and taxpayers, is a tax position.

So a tax position includes, say, the tax avoidance cases with the banks, or a case where someone says they earned nothing but Inland Revenue finds they did earn a million dollars. The tax on a million dollars would be a discrepancy or change in the tax position.  Both of those involve a liability for an amount of tax and these are matters people would consider a discrepancy.

But a discrepancy is also a change in a memorandum account, or a change in the amount of tax losses. So if Inland Revenue finds that someone had overstated the losses, that counts as a change in tax position. And all these things are what I would call good work. All of these things are important activities in the investigation function.

But if you think about it, there’s different degrees of effort and different degrees of pushback that you get from a taxpayer. There’s a spectrum. So on one hand, you would have changing someone’s tax return which means they have to pay more tax and they really don’t want that.

But on the other hand, you could have an adjustment of losses for a company that’s perennially a loss maker or, and this is my favourite example, adjusting the imputation accounts of New Zealand subsidiaries of Australian companies. After the double tax agreement with Australia changed, you no longer had to attach imputation credits in order to be exempt from non-resident withholding tax.

In those circumstances, changes to losses or imputation credit accounts aren’t met with much pushback because they don’t really affect the material position. It’s still useful work but it’s a sort of lower quality discrepancy versus the higher ones where you would be changing someone’s taxable income in a way that they had to pay tax.

Now, from an investigation perspective, the top end, like in the bank tax avoidance cases, you know, taxpayers throw everything they’ve got at it in resisting amendments and it’s a lot of work. And so, a discrepancy coming from that is really hard won.

All the time that I was in the field, I saw all the effort really going into what I call the high value discrepancy. I mean, there would have been some other stuff that went on. You know, like if you’re doing an audit, you find things. But I found that the audit programme was really targeting only what I call the high quality discrepancies.

TB

And speaking from the other side, those were the fights that we’d be having with Inland Revenue: what was deductible, what was taxable. We’d sort out arguments about incorrect imputation credit accounts and losses brought forward relatively quickly and resolve those issues. And we don’t tend to dig into the trenches for them. But the other point of these highly more technical matters, yep, that’s where the fights happen.

Andrea

That’s right. And so while strictly speaking, everything is a discrepancy, everything I always saw when I was in the field at Inland Revenue was the audit programme was targeted to the high quality ones, but low quality ones might just tick in.

So knowing that, when I was hearing that even though the audit hours had gone down, Inland Revenue was still meeting its targets, I was like “Okay. There’s a couple of ways that could happen. The new computer could be really, really flash and be doing an awesome job. Or maybe there’s another option.”

So, after discussing it with the PSA I filed an Official Information Act request asking for audit hours by year and broken down by area. I also asked for discrepancies split by type. And I gave the examples of loss adjustments and imputation adjustments. Because I know in the past investigators always coded those things up.

So if we saw, like, lots of going after people’s income tax. I’d have been really comfortable; the Department would have been just awesome to be able to deliver that with really few audit hours.

TB

Yes. The Official Information Act (OIA) request that you got back is really very interesting reading.

Andrea

So in terms of audit hours, we’ve got a breakdown for each of the years ending 30th June 2016 which would have been the last year I was at Inland Revenue, through to 30th June 2020. And this is a version of what came from the Andrew Bayly Parliamentary questions from last year.

And I think the PSA is looking to make the OIA public. But in the meantime, the PSA is happy for me to send it out to anyone who wants it.

TB

So total audit hours have fallen by two thirds roughly and hours on complex technical issues are down 90%.

Andrea

That’s right. That’s right. So I would have expected the discrepancies would have similarly fallen, but maybe that’s old thinking. The total has gone from $1.2 billion to $958 million, which is less but not a lot less.

So complex technical I found fascinating in terms of the discrepancy. It’s gone in the 2015/16 year, which was when I was there, from $296 million in discrepancies. It peaks in 2016/17 at $462 million and then it goes to $295 for the latest year.

So on the face of it, yes absolutely, the Commissioner is right. While the audit hours have gone down the return or the discrepancy is unchanged, which is why I was really interested in what the discrepancies represent because, one can think thoughts, but it’s important to see what the facts are. And like I say, I knew that the investigators always coded this up. But it seems like the new system doesn’t tell you how it’s broken down.

TB

A little bit aside here this is a point I’ve had an interest/concern about for some time is that Inland Revenue has access to more data relating to the state of the New Zealand economy than practically any other organisation, but we don’t see a lot of it.

I’m always disappointed how little data Inland Revenue releases. Because my view, and you may well share this, the more you tell people about what you know, the better enforcement is, because people aren’t going to try fancy stuff.

Inland Revenue will know for example how much is being spent by the average bakery, and what proportion is cash, what proportion is EFTPOS. They know that all those details.  So people shouldn’t try and hide cash sales because it’s not going to work. That sort of detailed information Inland Revenue could be doing more with, but isn’t doing so at the moment.

So to find out that the system doesn’t appear to carry that level of detail, I have major concerns. Not just as a tax agent, but also as a taxpayer who’s had to pay a substantial amount of money – $1.2 billion I think – on Business Transformation, one of the biggest I.T. upgrades in the country.

And you’re telling me Inland Revenue actually aren’t able to draw more data? Because I know there’s a lot of very discontented software providers in New Zealand who didn’t get a chance to deal with this project.

Andrea

Here’s what Inland Revenue said in the OIA.

“You have requested the total discrepancies be further broken down by time. I’m only able to provide loss reduction adjustments in part where these have been captured manually for the reporting by staff in our new system (START).

“The balance of any loss reduction adjustments and all imputation adjustments are either recorded in one of our heritage systems (eCase) which has been decommissioned, or as other information in START. To provide these figures, would require a manual review of individual case records.  Accordingly. I must refuse this part of your request…because the information sought cannot be made available without substantial collation or research.

It astounds me because what they are saying even is that even the managers don’t know how these are broken down. I’m speechless, I don’t know where to start with it.

TB

Wow, just talking generally about Business Transformation, obviously, I’ve talked in the past about how we as tax agents feel it’s gone.  To say underwhelmed would probably be unfair, but we have not been happy with some of the side effects of it.

So are you telling us Inland Revenue have got a system that doesn’t work well with agents who are the principle people who work with it and also doesn’t record information regarding audits?

Another thing is we know is that if they want to make any proprietary adjustments to the system, they have to get sign off from all the other tax authorities that use the same system. There are six or seven others, I think, including Finland. So there’s quite a lot of questions around how has been sold to us and how it’s actually operating.

And then come back to the point you started with – there’s been a fallout with low morale in Inland Revenue. That is not good for the tax system, let alone for Inland Revenue itself, but for us as taxpayers. I don’t think it’s a good system when the person on the other end of the phone is less than happy to be there. What is the PSA finding on this stage? It’s not particularly encouraging from what you have said.

Andrea

The PSA is in the middle of some processes so I don’t feel I can speak for them. They are looking at supporting staff through this, is probably the short answer to that question.

TB

A very diplomatic answer.  So what you’re telling me is a little disconcerting, because it sounds like these numbers may not mean everything you’d expect them to mean.  And talking about audit activity, we’re not seeing as much audit activity as previously. I think Covid-19 might have caused some interruption, but there definitely seems to be lower audit activity going on.

And I have to say, I do struggle with the numbers here which suggest Inland Revenue is identifying roughly the same amount of discrepancies but with one third of the hours. If the new system is as efficient as that, then they should be exporting it. The productivity gains are enormous. The New Zealand economy would go gangbusters if we could get those productivity gains across the board.

We’ve got an overall decline in discrepancies as well. The amount of revenue taken on this has declined from one point three billion in the year to June 2017, to now 958. And it’s a downward trend.

And they’re not seeing much gain in the hidden economy either. That number is constant roughly as well, which again surprised me because we know there’s a lot more out there. So what’s your overall view of what’s going on here?  Because when you drill into it, it doesn’t seem to stack up quite as well, does it?

Andrea

Well, to be fair, when I looked at the Inland Revenue funding for an article I wrote a few weeks ago, it’s quite interesting to see that investigations funding is falling.

TB

What? Did you say investigations funding is falling?

Andrea

Yes, funding for investigations and debt management funding is falling, but you would expect Inland Revenue funding to fall overall because of all the money that’s gone into Business Transformation. But interestingly, investigations and debt management funding has fallen but processing has increased, which I don’t understand at all, because the new computer system was supposed to make processing much easier.

TB

Yes, I agree that doesn’t compute because if you’re designing a smarter system, you’d be putting the resources to where the smarts are, i.e. investigators. You’d also be wanting to put resources into debt management because it has been a longstanding problem for Inland Revenue Which to be fair to them, I think they’re now getting on top of. But now it’s got to deal with Covid-19 as well. When you think about it, Inland Revenue has got the Covid-19 fallout, a historic debt problem, so against that background falling debt management funding does not compute.

Andrea

I think it can be quite computable because if you have this idea that you’ve got a much bigger and flashier system that can take away the lower level work for debt and investigations, you could see that funding in those areas funding would fall. I always want more money in investigations, but that has a degree of logic to it. The logic of processing funding increasing, I can’t get my head around.

TB

What is the scale of the increase in processing funding?

Andrea

It’s gone from about $100 million to about $150 million.  Debt funding has gone from about $150 million down to under $100 million.  Investigations has gone from about $175 million down to just over $100 million.

TB

On debt management, I think it’s possible Inland Revenue can get certain big efficiencies if it gets into the act of chasing debt earlier.  If you’re not leaving it for years before you start asking questions, you will get some easy productivity gains.

But we’re always hearing, as you mentioned at the beginning, that investigations generally bring in seven dollars per dollar invested return. But at a time when the government’s books have been shot to bits, we are hearing these numbers are pointing to a reduction in the most valuable return the government can get from its main source. Yet there’s a 50% increase in processing funding for a new computer system on which we’ve already spent $1.2 billion dollars already.

I would want people providing oversight such as the Finance and Expenditure Committee to be asking a few more questions about this, because it does not stack up from where I’m sitting.

Andrea

Well, I just want to say one thing. We don’t necessarily know how valuable that seven dollars return we’ve been talking about is. As we’ve discussed it’s a tax position but it’s not money in the bank, it’s the amount before collection. But the other thing I would say is that debt has been rising since 2017. Looking at Inland Revenue’s June 2019 annual report, it’s gone from $2.9 billion, to $3.1 billion in 2018 and $3.5 billion in 2019.

So, I would agree with your comment. I found this out when I was preparing the Official Information Act request on behalf of the PSA and I was just, quite frankly, astounded.  Although I don’t like the fall in funding for audit investigations and debt, as a former Treasury official, I can see the logic of that, given all the capital expenditure that has gone into Business Transformation. But I was just floored that funding for processing obligations and entitlements has increased.

TB

Well, that’s quite a few bombshells just dropped in there about what’s actually going on. We have a new Minister of Revenue, David Parker, and a Parliamentary Under-secretary, Deborah Russell as well. They will get what’s known as a Briefing to Incoming Minister which will be released later this year in due course. Now, it’s going to be very interesting reading to see whether some of the issues we’ve just been talking about actually get picked up. But in the meantime, I would hope that other oversight bodies, such as the Finance Expenditure Committee, start asking some questions because it’s quite concerning that there’s a discrepancy, to use a word, between what’s being reported and what actually might be happening.

Well, I think we’ll leave it there. Andrea, thank you so much for coming on and great to have you on the show again. That’s it for this week. Thank you for listening.

I’m Terry Baucher and you can find this podcast on my website, www.baucher.tax or wherever you get your podcasts, please send me your feedback and tell your friends and clients. Until next week, ka kite āno.

Inland Revenue is contacting people about information received under Common Reporting Standards

2 Nov, 2020 | The Week in Tax

  • Inland Revenue is contacting people about information received under Common Reporting Standards
  • Company is put into liquidation for not having adequate accounting records
  • Inland Revenue research on the tax debt tipping point

Transcript

A few weeks back, I referred to the OECD’s Secretary General’s tax report to the G20 finance ministers and central bank governors, in which he referenced the impact of the Common Reporting Standards on Automatic Exchange of Information.

The Secretary-General noted that during 2019, nearly 100 jurisdictions exchanged information automatically relating to 84 million financial accounts covering assets of almost 10 trillion euros. And as a consequence, tax administrations so far have been able to identify for collection 102 billion euros in tax.

Inland Revenue is part of the automatic exchange of information process. And it made its first exchanges during the year ended 30th June 2019 when it sent more than 600,000 account reports and received over 700,000 in return. Prior to the arrival of Covid-19, Inland Revenue had been working through those 700,000 information accounts that it had received and had started sending letters to people who held such accounts.

Then Covid-19 arrived, and everything went quiet. Inland Revenue is now back on the case because this week a couple of clients received letters from the relevant Inland Revenue section.

The letter explains that Inland Revenue is one of many jurisdictions involved in the automatic exchange of information and then goes on to say,

“We have received information from one or more jurisdictions for the 2018 and or 2019 years, which indicates that you may have an interest in a life insurance policy overseas… If you are a New Zealand tax resident and have an interest in a life insurance policy not offered or entered into in New Zealand, it may be subject to the foreign investment fund rules.”

Now, quite apart from the reactivation of this initiative by Inland Revenue, the other thing that stood out for me about letter this was the specific reference to life insurance policies. These are, as the letter notes, covered by the Foreign Investment Fund (FIF) regime and surprise, surprise, given the complexity of the FIF regime, few people are aware of that.

So, this is something probably similar to the initiative Inland Revenue started about 10 years ago now in relation to foreign superannuation schemes when it started looking at the taxation of such schemes.  At that time, they were within the FIF regime and Inland Revenue found most people were not complying, again unsurprising given the complexity of the FIF regime.

The recommendation I would have here for clients is obviously to make disclosures if you haven’t already done so in relation to the life insurance policies. As it transpires, our clients have done so. And the other thing to be mindful of is that although the FIF regime has its problems  (in that you’re being taxed on 5% of the value of an asset which does not necessarily provide a cashflow), that treatment is possibly more favourable long term than not being within the FIF regime.  This is because the rules on the tax treatment of the proceeds of such policies on maturity is not at all clear.

If Inland Revenue is going to bang the drum about compliance with the FIF regime in relation to life insurance policies, it probably should also come out and state what it considers is the tax treatment for policies which are outside the FIF regime. That’s something we’d like, which would clarify matters greatly and probably ultimately encourage more compliance.

Why you must keep good records

As a tax agent, advising and reminding clients about the need to keep adequate records is a constant of our business. The consequences of not doing so can be extremely harsh, as Tower City Holdings Limited have just found out.

Tower is a property development company and was audited by Inland Revenue beginning in 2015.  Initially Inland Revenue was looking at GST returns and income tax for the year ended 31st March 2013. Ultimately though, Inland Revenue issued an income tax assessment for the year ended 31 March 2016 amounting to just over $4 million in respect to the sale of three properties for a total of just over $32,180,000.

Now, this is where it gets interesting as the Commissioner also assessed Tower for a tax evasion shortfall penalty of just over $3 million, which is pretty much the maximum possible for a first-time offender on the amount of tax assessed. Clearly, this company had been paying it fast and loose on some matters.

Now, you can imagine none of this went down very well with Inland Revenue. The Commissioner of Inland Revenue filed an application for an order under Section 241 of the Companies Act 1993 to place Tower into liquidation. This cited a number of grounds, including Tower’s inability to pay its debt, its failure to keep proper accounting records and breaches of various directors’ duties.

This ended up in the High Court, which has now ruled that the company can be put into liquidation on the basis that there have been serious and persistent breaches of Section 194 of the Companies Act 1993, which requires adequate accounting records be kept at all times.

It emerged that Tower had never kept any ledgers, cash books or any other such documents which would have allowed its financial position to be determined at any one time. This was apparently a deliberate policy on the part of Tower. Not sure exactly what it thought it would achieve by doing that, because as anyone well knows, if you get into a dispute with Inland Revenue, the burden of proof is reversed. If you haven’t been keeping records, it’s going to be very hard to prove to Inland Revenue that what you say is non-taxable is in fact, non-taxable.

And this case is also a reminder that Inland Revenue has plenty of powers. Every tax agent will tell you that, yes, some taxpayers can be a little slack around the matter although this is an extreme example of lack of poor record keeping. But the fact that Inland Revenue and the courts can actually put a company into liquidation on the basis of poor accounting records is something that should make directors of companies sit up and pay attention.

The tax debt tipping point

And finally, this week the Inland Revenue report for June 2020 has not yet been released as I was expecting. Looking for it, I came across a report titled Identifying Sanction Thresholds among SME Tax Debtors: An Overview. Now, the PDF notation indicated it was a 2020 publication, so I thought,  good, some interesting new research. In fact, the report appears to be from 2012 and therefore the data in it is quite old and probably not directly relevant because Inland Revenue has actually been working very hard to keep its debt portfolio under control.

But looking through the report, something caught my eye that is really quite fascinating and is still very relevant. Inland Revenue’s research indicated that the median debt tipping point, at which point the taxpayer just gives up on trying to manage the tax debt, was just $10,000.

Now, that’s way less than I or any other of my tax agent colleagues might have estimated.  Even allowing for inflation since 2012 it suggests that a similar tax tipping point today might be as little as between $15, and $20,000.  What that indicates is something that we did see on the Small Business Council, and that is that many SMEs are undercapitalised. And this is a point I think has started to emerge again in the wake of Covid-19.

Now, fixing that under-capitalisation in a pandemic isn’t going to be easy, but maybe the banks, instead of lending freely on residential property – therefore adding fuel to a dangerously heated property market – might just want to direct their lending elsewhere into something more productive. That’s just a random thought.

And on that note, that’s it for this week. Thank you for listening. I’m Terry Baucher and you can find this podcast on my website www.baucher.tax or wherever you get your podcasts. Please send me your feedback and tell your friends and clients.  Until next week ka kite āno

After the election what next in tax for the Labour Government? Who will be the Minister of Revenue?

27 Oct, 2020 | The Week in Tax

  • After the election what next in tax for the Labour Government? Who will be the Minister of Revenue?
  • A future role for green taxes
  • Problems with Inland Revenue’s online functions

Transcript

So now we know the election results and the morning after the election result, I got an enquiry from a US based tax website asking what’s going to happen? And in particular, how will the Labour Government be able to manage the issue around no capital gains tax and no wealth tax?

My correspondent also asked some questions about what’s going to happen in the international tax space, referencing comments I made last week about the OECD’s new Pillar One and Pillar Two proposals and progress on international taxation.

Labour when campaigning, promised an increase in the top tax rate 39% on income over $180,000. So, one of the first orders of business will be a tax bill to have that in place from the start of the new tax year on 1st of April.

Labour was a little less conclusive about what it was going to do over the trust tax rate. My view would be that it must rise from 33% to 39% as a “base integrity” measure. Otherwise, companies and individuals will use the opportunity to move income which could be taxed at 39% into trusts where it will be taxed at 33%.

There’s also going to be an incentive for companies to hold on to profits and reduce the amount of dividends distributed, given an unchanged company tax rate of 28%. And obviously shareholders will not be keen on paying an extra 11 percentage points if the distribution is received. This actually is a matter Inland Revenue is already concerned about, given the existing gap between the company rate of 28% and the top personal rate of 33%. And that problem is going to be exacerbated when the top tax rate rises to 39%.

Therefore, one of the big orders of business for Inland Revenue and the new government is what are they going to do about addressing that particular issue? So, watch this space. There could be some stronger use of existing anti-avoidance mechanisms or maybe a specific measure is brought in.

The US correspondent did ask if the government would be able to stick to its promise not to implement either a wealth tax or capital gains tax. I fully expect that will be the case. The Prime Minister has made her reputation on sticking to her word, and although she and Grant Robertson probably feel their hands are very much tied on the matter, that will remain the case.

Other options

It doesn’t mean that there aren’t other opportunities to raise revenue. The Tax Working Group considered the possibility of applying the risk-free rate of return method to residential investment property, similar in the way that the Foreign Investment Fund regime’s fair dividend rate applies to overseas investments.

I expect to see Inland Revenue get extra funding to tackle the cash economy, where estimates of the amount of tax currently being evaded each year range between $850 million and $1 billion. I’ve mentioned it before, and I think Inland Revenue will also be looking also at the question of fringe benefit tax on work related vehicles.

I also see that the Reserve Bank governor has started to talk about loan-to-value ratios coming into place. That is something that I raised recently in a column as possibly one of the only ways left to tackling the rapidly rising house prices. A related tax measure could be the application of the thin capitalisation regime.

Last week I talked about the taxation of multinationals and it is quite possible that we might see the digital services tax move forward, if nothing more than just to keep pressure up on this matter. It would be a big step for the government to take as they do like to move in lockstep with the Australians who aren’t doing anything on this. But if they’re having to wait to see progress, it might be that just simply pushing it forward to have it ready to go at a moment’s notice would be the option to take.

Also interesting to note in this week’s developments, is the antitrust action taken by the US government against Google which references the outcome of the rather damning report recently issued by the US House of Representatives.

Ex IR staff now tax minister candidate

Finally, it will be interesting to see whether Stuart Nash continues as revenue minister or a new minister is appointed. If Stuart Nash moves on, an obvious candidate would be my co-author, Dr. Deborah Russell, who is ex Inland Revenue and has been the most recent chair of the Finance and Expenditure Committee. Interestingly, one of the new Labour MPs, Barbara Edmonds, who won the Mana electorate, is also ex Inland Revenue and was seconded from Inland Revenue to work in the Minister of Revenue’s office. We should know next to by this time next week who’s going to be the Minister of Revenue.

By that time, incidentally we should also see Inland Revenue’s annual report. It will be interesting to see what’s being presented to the Minister.

Green taxes

Moving on, the Green Party’s campaigning for a wealth tax drew a lot of attention and has got pundits talking as to how much of a factor it might have been in Labour’s huge win. But putting aside the wealth tax green taxation is a matter which is going to become very, very important over the next 10 years.

Now, at the moment, jurisdictions all around the world are quite rightly reluctant to move quickly on introducing new for fear of damaging a recovery from Covid-19. However, that’s not to say that green taxes don’t have a role going forward. And another paper released a couple of weeks ago from the OECD looks at green budgeting and tax policy tools to support a green recovery.

The OECD also notes that carbon pricing is going to be important because it will encourage low carbon investment and consumption choices. And it regards carbon pricing as “a key tool for a successful recovery”. In particular, what it thinks is important about carbon pricing, such as our emissions trading scheme, is that it raises the cost of carbon intensive assets and therefore will steer investment and consumption towards greener, low carbon alternatives. And then ultimately, of course, carbon pricing can help restore public finances by bringing in tax revenues.

Although I think looking at the future role of green taxes, that’s something further down the path. And that, by the way, was also a conclusion of the Tax Working Group. It saw that there was a future in environmental taxation, but the actual tax tools had to be developed first, and that meant it didn’t see an immediate revenue gain from environmental taxation. But longer term, these would become more important.

The paper has some eye watering numbers in it. For example, it references the European Coronavirus Recovery Fund, which is worth over one trillion euros over the course of the six years between 2021 and 2027. And of that, €300 billion is specifically earmarked for green projects.

On carbon pricing, the OECD research shows that 97% of energy related carbon emissions from advanced and emerging economies, which would include New Zealand, are not taxed at a level that’s compatible with decarbonisation, according to the Paris Agreement. And there are some 70% of emissions that are entirely untaxed. That’s a hugely controversial matter here, obviously, because of our agricultural emissions.

So, what I think we will see coming from the new government going forward is, for example, a feebate scheme, which involved rebates for purchase of electric vehicles to replace fossil fuel vehicles. That was one of the projects that New Zealand First put the kibosh on. We’ll probably see that come back up on the table very quickly. And we also expect to see some other moves on this matter.

But I expect although there will be steps in environmental taxation, these will be rather cautious to begin with, for the reason I say said a few minutes ago. No government would want to increase taxation too quickly during the early stages of a recovery from the Colvard pandemic.

The IR stumbles with its ‘think big’ project

And finally, Inland Revenue’s online functions have been experiencing technical issues all week. Now, this is unusual because this time of year is not usually a time of peak demand. This is between early May and late June, when it is dealing with the wash up from the previous tax year. So, what’s going on at the moment? We don’t know but it’s certainly not a demand related area.

Now, of course, this touches on Inland Revenue’s very controversial $1.5 billion Business Transformation project. That has been a controversial project for a number of reasons. Firstly, the sheer size of it. I know that local IT providers resented being shut out of this project. One provider at a 2014 tax conference pointed out that they had successfully built and implemented a GST system for the Bahamas in barely six months. They could not understand why Inland Revenue was spending the amount of money it was on the overall Business Transformation project.

Actually, that point also touches on something which several submitters made to the Small Business Council. And that is small businesses often felt shut out of government contracts because of the complicated procurement process involved. And one thing I’d like to see from the new government going forward is making it much, much easier for small businesses to bid for government contracts. And that also applies to local government.  The amount of spending across local and central government runs to tens of billions of dollars.  The risk around simpler procurement policies for, say, projects of up to, say $5 million or so are actually statistically insignificant. So that’s something I’d like to see the government move on.

Inland Revenue’s outsourcing to an American company for the upgrade project didn’t go down well with the local tech industry. And again, outsourcing overseas is something the government would need to be careful about moving forward.

‘Transformation’ gets tax community offside

Inland Revenue’s Business Transformation didn’t seem to factor in its relationship with tax agents. Although the actual transformation is largely successful from Inland Revenue’s viewpoint, it hasn’t gone down well in the tax agent community. I had a client complain to me that he had recently received a call from Inland Revenue which basically said you don’t need a tax agent anymore because we can help you manage your tax. His comment was, “I really felt I was being sold something”.

We’ve complained about that unsolicited call and we’re not the only tax agency to have had clients receive such calls.  But so far, our complaints don’t appear to have been heard.

Now, Inland Revenue has a very proper role to call clients and taxpayers who are behind on filing or tax payments. But what many tax agents have experienced is calls are made directly to their clients which are not related to these matters at all. And that is something that I think has gone on for too long and needs to be addressed. So that’s one of the headaches the incoming Minister of Revenue, will need to pick up on.

Well, that’s it for this week. I’m Terry Baucher and you can find this podcast on my website www.baucher.tax or wherever you get your podcasts. Thank you for listening. And please send me your feedback and tell your friends and clients.  Ka kite āno.