Wellington, January 16, 2020
New Zealand is losing millions of dollars of taxes to the ‘hidden economy’ because Revenue Minister Stuart Nash has taken his eye off the ball.
In the hidden economy, work, services and business transactions occur under the radar – undeclared activity for which taxes should be paid but are not. No one knows just how much it is actually worth but experts have estimated it’s between $9 billion and $26 billion.
Inland Revenue Department (IRD) collected $77.9 billion worth of tax in 2019 but experts estimate that in respect of the country’s self-employed alone, it is losing at least $1 billion in tax on unreported income.
IRD has been so focused on dealing with problems created after it introduced the third stage of its business transformation computer upgrade in April that it’s actually costing the country money now. The third stage of the upgrade rolled out in April has led to a huge number of enquiries as people have sought to clarify their personal tax affairs.
As a result staff have been diverted from other areas IRD should be policing, including the hidden economy.
IRD staff diverted
The number of IRD staff working on investigations of undeclared income fell from 200 in 2015-2016 to 143 this (financial) year. Tax recouped from investigations from $152 million to $108 million.
Mr Nash should be making sure that the government gets the full amount due in any given tax year. If we are losing revenue the Government has to either generate more income or it has to put up taxes. No one wants that.
Our tax system is based on everyone paying their fair share but the amount of money being recovered from the hidden economy is small.
A good Minister would be ensuring this is sorted out immediately.
Andrew Bayly is elected Member of Parliament from Hunua and National Party’s Spokesperson for Revenue and Building & Construction and Associate Spokesperson for Finance.