New Zealand Set to Put Pressure on Evasion

October 26, 2009 Taxation in New Zealand  No comments

The New Zealand Inland Revenue Department (IRD) and Government figures have given clear indication that the country will see increased pressure on tax evaders in 2010.

According to a submission from the IRD to the government supported Tax Working Group, released October 25th, the government is losing approximately NZ$300 million in taxation receipts annually through money hidden in trust accounts. The total tax evasion amount is only increased when companies created purely for the purpose of tax avoidance are considered. Statements by Bill English, New Zealand Finance Minister, have supported this, with claims being made by him that the government will take action in 2010 to close loopholes on those that it considers to be “tax dodgers”.

Further, the IRD report stated that since the introduction of New Zealand’s top marginal tax rate of 39% in 2000, the department experienced a significant influx of financial rearrangements which saw many claiming to not be applicable for the new rate. Bill English labeled behavior like this as “legitimate avoidance behavior”, but claimed that its practitioning by high-income earners “undermined the goodwill of lower-income earners”.

Elaborating on the IRD’s position, Bill English said, “As a country, we want families, businesses, accountants and lawyers looking at how to unlock greater income and productivity, not working out how to minimize their tax,” and “We don’t want people spending their time and resources trying to avoid tax. We also don’t want IRD devoting all its time to chasing tax and compliance issues.”

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