Date posted: 17/05/2018 3 min read

Crackdown on tax avoidance and other new tax initiatives

The Government is counting on an extra $726.3 million of revenue over the next four years from new initiatives including a crackdown on ‘tax dodgers’

In brief

  • The Government is only banking $726.3m over four years from all its new tax initiatives
  • Budget 2018 gives Inland Revenue $23.5 million to ensure outstanding company tax returns are filed
  • The Budget includes $3.0 million of operating funding over the next four years to analyse the potential to improve tax compliance in specific industries through the use of third-party reporting and withholding taxes

The Government is counting on an extra $726.3 million of revenue over the next four years from new initiatives including a crackdown on ‘tax dodgers’.

Budget 2018 gives Inland Revenue $23.5 million to ensure outstanding company tax returns are filed. This is expected to recover approximately $183.3 million.

The Budget also includes $3.0 million of operating funding over the next four years “to analyse the potential to improve tax compliance in specific industries through the use of third-party reporting and withholding taxes”. The analysis will be useful but there will be a need for funding to implement any changes.

A proposal currently out for consultation on ring-fencing rental losses will restrict the ability to offset tax losses from residential properties against other income. The Government expects this change to boost revenue by at least $325 million over four years. Again the devil will be in the detail of the design. In the past ring-fencing rules have been less effective than expected. 

The already announced plan to bring overseas suppliers of low-value goods into the GST net is estimated to produce $218 million of new revenue over the next four years and is expected to increase each year as online shopping increases.

We note that the Government is only banking $726.3m over 4 years from all its new tax initiatives including the crackdown on tax avoidance and evasion.  Given the size of the shadow economy (estimated at upwards of $1 billion per annum) is this an opportunity lost? There is scope for further increasing IR resourcing to address the challenges to the integrity of the tax system posed by the shadow economy.

NZ Budget 2018

In terms of the bigger, longer term challenges for the tax system, read our submission to the Tax Working Group and our 2017 Taxing Times perspective

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