IRD has learnt some lessons

Russell says the way the department went about its programme was different to previous efforts and the difference in approach paid off.

"We started out not by looking at how many audits should we do, but by doing more analytical work than we would normally have done, and putting more effort into communications, through the media and other avenues."

One example: writing to taxpayers who use loss attributing qualifying companies (LAQCs) and had put their own homes into such a company.

"We made it quite widely known we thought that was inappropriate, we did a degree of data-matching and then letter-writing rather than auditing.

"And about a third of those [we contacted] came in and made voluntary disclosure. That was 1600 audits we didn't have to do. At a time of resource constraints that was pretty important - audits are costly in time and money and other resources."

A similar approach may be adopted with targeting people who have nominated low or zero residential withholding tax (RWT) rates.

"We know for example a lot of people have nominated too low a residential withholding tax (RWT) rate with their bank or whatever. So we will be following that up."

Banks and most other savings institutions which offer term deposits, savings accounts and portfolio investment entities (PIEs) allow the investor to nominate their RWT rate and if they nominate zero they have to include the income from the interest on their personal tax statement.

The IRD's Compliance Focus document, released last Friday, notes there are numerous benefits for the taxpayer.

"This has flow-on effects for working out an individual's correct entitlements and liabilities, eg, Working for Families Tax Credits, child support payments and student loan repayments."

The department is working with the Bankers Association and other financial institutions and Russell says there will be some analytical work on why people are nominating lower rates than they should, along with an awareness campaign.

Comments from our readers

No comments yet

Add your comment:

Your name:
Your email:	Not displayed to the public
Comment:
Comments to NetProphet go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Anti-spam verification:

Type the text you see in the image into the field below. You are asked to do this in order to verify that this enquiry is not being performed by an automated process.

Email Updates Sign up now

RSS Feeds View the list

Twitter Read our tweets