TalkTax

In addition to recommending that gift duty be abolished, the report back from the Officials’ Report to the Finance and Expenditure Select Committee on Submissions on the Taxation (Tax Administration and Remedial Matters) Bill highlights some interesting statistics about the use of trusts.

According to the report less than .003% of the 430,000 IRD numbers (that is less than 13 people) who filed gifting statements were bankrupted between 1 July 2001 and 28 May 2010. Presuming the .003% figure is correct, by itself this doesn’t mean an awful lot. However, when you consider that the Ministry of Economic Development records 25,974 bankruptcies during the same period, further consideration is warranted.

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One of the great unknowns when you enter the boxing ring is how hard your opponent will be able to hit you. In recent times, the Inland Revenue has just delivered a couple of powerful punches to the face of David Tua, claiming he owes a whopping $2.2 million in unpaid taxes. Read more

Tax headlines recently have reflected lengthy tax disputes, many which have been lost by the taxpayer. Inland Revenue has increased its focus on tax audits and this can leave many companies feeling nervous about their practices. Are you next? Read more

…and so the battle continues between a tax “genius” and the IRD. Since the 1980s, Mr J G Russell (Mr Russell) has been involved in legal disputes with the IRD over various schemes designed to reduce liability for income tax on companies he consulted to. The IRD claims that he owes millions of dollars in back taxes, which has since grown, with penalties and interest, to a whopping $138m. Read more

Received anonymously:

The Rewrite Advisory Panel (RAP) was established to advise rewriters of the Income Tax Act 1994. The Income Tax Act 2004 saw the RAP becoming the arbiter on possible unintended legislative changes and the Income Tax Act 2007 saw it becoming the overseer of the clarity of that Act (see: www.rewriteadvisory.govt.nz)

In 2009, a submitter raised with the RAP the definition of ‘revenue account property’ (the second RAP referred to in the title but, to avoid confusion, I do not use that acronym in this note). The submitter said:–

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Yesterday the Government announced that the new Australia/New Zealand double tax agreement has entered into force. This means that both countries have completed their domestic law requirements for incorporating the treaty into their respective laws. The way is clear for the provisions of the treaty to apply.

The application dates are different for different types of tax. The first relevant application date is the provisions relating to Fringe Benefit Tax (“FBT”).  Briefly the Article provides that FBT will follow the taxing rights of salary and wages, thereby reducing the possibility of double FBT. The provisions apply from 1 April 2010, and is slightly different compared with the 1995 treaty position.

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It’s been great getting some feedback on thoughts around the design of the tax system. Following on from those thoughts, given the Government’s heads up for property investors it would be great to hear some thoughts on this subject.

In this regard it is noted that it is difficult to reconcile is the view (accepted) that “the tax system lacks integrity and fairness because of differences in the treatment of entities” with the statement that the Government will “be making changes to the way property is taxed.”

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Tax is topical right now.  The Tax Working Group reports have made headline news around the country.  Should a new land tax be introduced? Should GST be increased?  Is it time for a comprehensive CGT?

Whether we like a tax, however it is imposed, is largely irrelevant.  If a tax is imposed we’re stuck with it.  That said, it is generally accepted that a “good” tax is one that is seen to be fair (so that less effort goes into evasion) and one that is not so expensive to administer that it contributes little to the tax base.

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