New Zealand: New Zealand releases discussion document on modernising tax administration
The New Zealand government released a discussion document late last year, outlining proposals to simplify and modernise the Tax Administration Act. The proposals are one aspect of Inland Revenue's broader business transformation project.
The discussion document, entitled "Making Tax Simpler – Proposals for modernising the Tax Administration Act", proposes legislative changes to:
Better assist taxpayers to "get it right from the start";
Extend Inland Revenue's care and management powers under the Tax Administration Act so that Inland Revenue has a broader and clearer discretion to determine how the law applies to particular situations where there are gaps or anomalies in the way the legislation is drafted or would otherwise apply;
Increase access to information and cross-government information-sharing; and
Adopt a new "taxpayer confidentiality" rule to replace the "tax secrecy" concept.
The discussion document 'firms up' the proposals included in an earlier discussion document (released in November 2015) and addresses the submissions received in response to that earlier document (see earlier article entitled "New Zealand continues tax administration reform", International Tax Review, March 9 2016).
It is proposed that a new Tax Administration Act will be enacted, following completion of Inland Revenue's ongoing "Business Transformation" programme in 2019–21. Until such time, proposals included in the latest discussion document will, to the extent they proceed, be incorporated into the existing legislation in progressive amendments.
Getting it right from the start
The government proposes various changes to support taxpayers in "getting it right from the start".
The specific proposals include a possible reduction in fees (at least for small and medium sized businesses) for binding ruling applications, the ability for a taxpayer to seek a binding ruling after having taken a tax position in a tax return, and expanding the criteria for using a streamlined process for correcting minor errors in tax returns.
Extending Inland Revenue's care and management powers
Inland Revenue's care and management powers will be extended by providing a statutory discretion to remedy legislative anomalies in specified circumstances.
Taxpayers could choose whether or not to apply any determination or decision Inland Revenue makes pursuant to this extended care and management power. This is an important practical safeguard for taxpayers, and is appropriate given the constitutional principle that tax should be imposed only by or under Parliamentary authority and not by the discretion of officials.
Increased access to information and cross-government information sharing
The discussion document proposes a new provision to empower the making of regulations governing the repeat collection of external data sets (for example credit and debit card transaction data collected from financial institutions and records of online sales activities). The government notes it will follow the Australian and UK examples in its approach to the transparency reporting of external dataset collection so that the public is aware of circumstances in which certain data is routinely provided to Inland Revenue.
Further, a new legislative framework will be introduced to allow more flexible information sharing between government agencies via regulations. It is proposed that principles governing when information-sharing is appropriate will be enacted alongside the power to make regulations for information-sharing.
A new taxpayer confidentiality rule
The proposed taxpayer confidentiality rule narrows the coverage of the tax secrecy concept, which prohibits the disclosure of any and all information relating to the administration of the tax system.
Taxpayer confidentiality as a general rule would (subject to certain exceptions) protect information that identifies or could identify a taxpayer. The discussion document notes that this is similar to the approach taken in other countries such as Australia and Canada. A further proposed amendment would permit Inland Revenue to refuse requests for official information if necessary to protect the public revenue.
The government has sought submissions on the proposals by February 24. It is unlikely that the proposed changes will be enacted until 2018.
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