IR increases in funding.
Inland Revenue, along with most tax agencies worldwide, have been systematically investing in upgraded technology platforms over the past decade or more, and are now exchanging significantly more information and data on taxpayer activity with each other and with banks, custodians, financial institutions, and professional advisers such as accountants and lawyers.
IR in New Zealand has seen an infusion of additional funding this year to further ramp up their audit and compliance efforts. They’ve specifically raised several areas of focus for them at the moment:
Sectors and areas of focus
Construction
The Construction sector has been a focus for a while now, and IR has been increasing its awareness and education efforts in this space in the last several years. They have now increased their activities further and have started making unannounced visits to construction sites as well as increasing debt collection and audit activity.
Crypto assets and transactions
Crypto trading is also a major focus, with around 7 million crypto transactions executed last year by Kiwis, worth approximately $8Bn. IR has flagged a high level of under-reporting of income from many of these account holders, and data-sharing arrangements, anti-money laundering (AML), and global financial reporting standards are increasing visibility of trading activity by taxpayers.
You can read more about how crypto assets and transactions are taxed in New Zealand here.
Multinational tax
Taxation of global companies has been increasingly in focus on the global stage for some time now, and further measures aimed at preventing profit-shifting, such as digital services taxes (DSTs) are increasingly on the policy agenda in NZ and overseas. Multinational and corporate entities usually have complex tax issues and structures and the dollar amounts at stake are often large. IR is expecting to increase audit activity in this area as a result.
Other areas
Additional areas of focus for IR includes the Retail Sector, Trusts, and Student Loans. Most student loan focus will be on borrowers based overseas who are in default on payments; particularly those who own property in New Zealand. Trusts have been on the radar for a while, particularly with the increase in the top trustee tax rate to 39%, and there will be increased scrutiny on transactions that occurred in advance of the date of the higher rate coming into effect.
The retail sector has been singled out partially due to the emergence of electronic sales suppression tools – these are software point of sale systems that change sales records to facilitate skimming of cash and manipulation of inventory data to under-report revenue figures.
Focus on Compliance
If you’re in need of advice on your tax compliance status take a look at how we support businesses here.