John Wright
Under-Secretary to the Minister of Revenue

15 August 2001

People who get into difficulty with their taxes are likely to benefit from proposals in a Government discussion document released today.

Associate Revenue Minister Paul Swain and Under-Secretary to the Revenue Minister John Wright released the document - the third in a series of four tax simplification discussion documents. They say the tax rules should reflect society's standards.

"Rules that are too harsh will not be perceived as fair, nor will rules that are too lenient," Paul Swain said.

"The proposals in this discussion document attempt to strike a balance between the two extremes, to encourage voluntary compliance with the tax laws in the best possible way.

"We want to replace the current tax rules that provide relief to taxpayers in debt who face hardship," Paul Swain said.

John Wright said the government intends reducing the penalty for lack of reasonable care for first-time offenders, and generally make things a bit easier for those who do get into trouble.

"The new rules will give Inland Revenue greater flexibility in dealing with taxpayers' debt problems, and will encourage taxpayers to contact the department about their debt problems as early as possible," he said.

"For example, if a taxpayer enters an instalment arrangement for paying off tax debt, late payment penalties will stop as soon as the taxpayer contacts Inland Revenue.

"The discussion document also deals with problems raised by Parliament's Finance and Expenditure Committee in its 1999 inquiry into the powers and operations of the Inland Revenue Department.

"We have already acted upon several of the changes recommended by the committee, including reducing late payment penalties. This discussion document makes a number of proposals to complement that work, such as ensuring that taxpayers are given more information in their dealings with Inland Revenue," John Wright said.

Associate Revenue Minister Paul Swain said another main proposal in the discussion document is to impose a penalty on promoters of tax avoidance schemes.

"The rationale is that promoters of these schemes should be clearly accountable for their actions," he said.

"Other proposals would strengthen Inland Revenue's information-gathering powers and generally clarify the law for people who overpay their tax and want to transfer the excess.

"The issue of who is liable when an agent doesn't take care is also discussed and options considered in the document.

"This discussion document is part of the consultation process in the continuing review of the compliance and penalty legislation in the Tax Administration Act. The point of the review is to determine if the relatively new legislation, enacted in 1996, is working as intended, and where it could be improved," Paul Swain said.

The closing date for submissions on the proposals on debt, hardship and transfers of excess tax is 21 September. Legislation arising from these proposals will be included in a taxation bill to be introduced later this year. The closing date for submissions on the other proposals is 21 November.

The discussion document, Taxpayer compliance, standards and penalties: a review, is available at Bennett's Government Bookshops and on the web sites of the Policy Advice Division of Inland Revenue at www.taxpolicy.ird.govt.nz and the Treasury at www.treasury.govt.nz.