The New Zealand Government has continued its consultation on the simplification and modernisation of New Zealand's tax administration system by releasing the discussion document 'Making Tax Simpler – Towards a New Tax Administration Act' (discussion document (DD)).
This DD is the third such DD in a series that addresses New Zealand's tax administration system. (See 'New Zealand: Government seeks public consultation on simplifying and modernising tax administration system' in the May 2015 issue of International Tax Review for our summary of the first two DDs).
The current law governing New Zealand's tax administration system was enacted in 1994 and has not been comprehensively reviewed since then. In the meantime, there have been significant changes in the social, technical and economic environments including the move to online communication, and a perceived increase in demand for improved public services. The Government's aim is to make New Zealand's tax administration system simpler and more flexible for the future.
Three key areas of tax administration addressed in the DD are:
- the role of the Commissioner of Inland Revenue. The proposals include that the Commissioner's 'care and management' responsibility be clarified to provide the Commissioner with greater administrative flexibility in limited circumstances;
- the collection of information by Inland Revenue. The proposals include that Inland Revenue's powers to access bulk third-party information be clarified and that Inland Revenue be able to access remotely stored information in the same way that information stored digitally or physically on a taxpayer's premises can be accessed; and
- the secrecy of tax information. The proposals include that:
- the current secrecy rule be narrowed from referring to "all information" to information that identifies, or could identify, a taxpayer;
- consideration be given to whether a taxpayer should be able to consent to the release of their information in certain circumstances; and
- consideration be given to how Inland Revenue could support improved information flows between government agencies.
In the case of the proposals addressing the secrecy of tax information, while the relaxation of the current secrecy rule may result in efficiencies for the Government and taxpayers, there are concerns about the possible privacy implications. Inland Revenue has the most intrusive information-gathering powers of any government agency. Those powers have traditionally been balanced by Inland Revenue's obligation to use taxpayer information only for the purposes of its tax administration responsibilities. Sharing, even with other government agencies (whose own information-gathering powers are generally less comprehensive), has been permitted only in exceptional and well-defined circumstances. Any relaxation of the restrictions on the use of taxpayer information will need to be carefully considered, especially in the case of information that Inland Revenue has obtained by compulsion of law.
It is expected that legislation to implement some of the measures foreshadowed in the DD may be proposed in Parliament within the next year. Other issues may go through a further consultation stage before legislation is proposed. The Government appears to be proceeding cautiously with these reforms, which is to be commended given the practical and (in some cases) constitutional significance of the issues the proposals raise.
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