Self-Employed Kiwis Hide a Fifth of Their Income

August 7, 2018 Taxation in New Zealand

Tax compliance in New ZealandWELLINGTON – Self-employed New Zealanders are hiding 20 per cent of their income, and the modern “gig economy” is not making the situation better.

Self-employed taxpayers in New Zealand are underreporting their incomes by an average of 20 per cent in order to reduce their tax payments, according to the results of new research made public by the government appointed Tax Working Group.

The research looked only at individuals who are self-employed and not working through a corporate structure such as a company or trust.

Typically in New Zealand, such taxpayers are sole traders or working as part of a partnership.

These taxpayers represent approximately 55 per cent of the self-employed income generated in New Zealand, with the remainder being represented by those who are working through their own company or Trust.

The portion of the income which is under-reported, and subsequently untaxed, represents a total of approximately NZD 850 million in lost revenues.

The research indicated that New Zealand’s experience with under-reported income is not out of line with other jurisdictions, as averages overseas ranged from 17 per cent to 42 per cent.

The head of the Tax Working Group, Sir Michael Cullen, added that the advent of the “gig economy” is now providing significantly more opportunities for underreported income, which would need to be addressed in the future.