All of us can identify what our taxes pay for: roads, schools, hospitals and so on.
But as the devastating effects of the Christchurch earthquake have reminded us, they pay for much more.
I believe it is time to announce the Compliance Plans of the Inland Revenue Department (IRD) for the year and discuss what you need to do to get your tax obligations right.
IRD is responsible for collecting and distributing revenue on behalf of the Government, and the tax revenue collected goes towards funding essential services that benefit all of us.
While most individuals and businesses pay the right amount of tax, there are some who find it difficult to meet their obligations, and a minority deliberately refuse to comply.
Every year we address areas that may be a risk to the Government’s revenue base. Our compliance focus document, Helping you get it right: Inland Revenue’s compliance focus 2011-2012, gives a detailed description of our Compliance Plans for the coming year. It also highlights what you can do if you think you have got it wrong.
We believe that raising awareness of the compliance issues identified will give you an opportunity to review your own situation and check that everything is in order. The document is available at www.ird.govt.nz/gettingitright
Aggressive tax planning, under-reporting income and operating outside the tax system and fraud and identity theft are three key areas discussed in detail in the document. The compliance risks identified have been prioritised, based on evidence, research and analysis.
Additional funding received from the Government in 2010 has enabled us to focus on the hidden economy, property and debt compliance areas over the next few years.
We are continuing to work with industries such as hospitality, scrap metal, fishing and aquaculture, tourism and agriculture as well as monitoring online trading and short-term property rentals.
Help to help others
We respond to the compliance risks with a range of approaches, such as working with tax agents, community groups and industry bodies, increasing our communications activities and advisory services, and where necessary, enforcement action.
The focus of our compliance document is about helping you get it right, and this not only involves identifying the areas under focus but also giving guidance on what our customers can do if they think they may have got it wrong.
Businesses realising their mistake should contact us as soon as possible.
If you contact us before we start investigating, we may be able to significantly reduce any shortfall penalties.
Keep good records: Good record keeping is essential to managing a business. This ensures you have the right information if you are investigated for any reason. If you deal for the most part in cash, make sure you provide customers with receipts.
Voluntary Disclosure: If you have not been declaring your income, or you have found an error in your tax return, you can make a voluntary disclosure by completing the Voluntary disclosure (IR 281) Form online www.ird.govt.nz (keyword: IR281).
This removes the risk of prosecution and reduces any penalties you may face.
Anonymous information: You can also report information about tax evasion and fraud to us anonymously through our website www.ird.govt.co.nz (keyword: anonymous) if you suspect someone is not meeting their tax obligations.
If you would like to attend our free tax seminars or workshops held throughout the country, register at www.ird.govt.nz.
Abdul Rafik is Inland Revenue’s Community Relationships Advisor based in Auckland. He is happy to answer readers’ queries, which should be sent to