Inland Revenue widens net to catch tax-dodgers
Inland Revenue will soon have wider powers to collect data on where people are spending money, to ensure businesses are paying the right amount of tax.
New rules apply from April 1 next year, requiring payment service providers, such as online payment platforms and eftpos providers, to provide data to Inland Revenue every six months about all the transactions they process. The rules are being introduced as part of new tax administration regulations which come into force next month.
Inland Revenue will then compare this data to what businesses are declaring on their tax returns, to ensure that all their income is being taxed appropriately.
The department was already able to access this information by requesting it from providers but the rule change automates the process.
Any payment service provider that does not provide the data every six months faced penalties including fines and imprisonment.
Deloitte tax partner Robyn Walker said it was designed to tackle the ‘‘hidden economy’’ in which people were not paying sufficient tax.
‘‘This will be a huge amount of new data that Inland Revenue will be receiving and having to process.’’
She said businesses should be aware the data would be held about them and they could expect ‘‘please explain’’ questions if income reported in a tax return was less than the total amount of payments recorded in transaction data.
‘‘To me, it also raises a question about how much data is Inland Revenue collecting, and does it need it all. If this data is being collected about anyone in business, why is Inland Revenue needing to separately collect information from platforms about holiday accommodation or ride-sharing services?’’
She said payment services providers would probably need to build systems to be able to report the data.
‘‘It will be on an aggregated basis, not every individual transaction but summarised at a level of what money has gone to who and a month-by-month breakdown. It’s a huge amount of data.’’
She said the department had said it would target education at people who ‘‘did not understand correctly’’ their tax obligations.
‘‘Everyone would agree that everyone should pay their fair share of tax . . . but we’re moving away from trusting people to wanting to collect this vast amount of data.
‘‘All businesses will be from next year on notice that IRD is going to see everything.’’
She said it had the potential to drive more ‘‘hidden’’ transactions into cash.
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