Inland Revenue hits brick wall trying to contact 14 rich-listers

Friday, 1 July 2022

The Inland Revenue Department is struggling to contact 14 rich-listers involved in a compulsory tax survey.

14 rich-listers have not responded to an instruction from IR to complete a wealth survey
The survey was designed to shine more light on how much tax the wealthy pay
The individuals could face prosecution, but IR won’t say whether it will take that step

Inland Revenue has not heard back from 14 of the 376 wealthy people who it instructed to participate in a compulsory survey that could help reshape the tax system.

Spokesperson Gay Cavill said that failure to comply with its requests for information would be a breach of the Tax Administration Act, but could not say whether it was considering enforcement action.

Deloitte advised last year that failing to comply with an information request from IR could result in a fine of $25,000 or three months imprisonment, for a first offence.

Revenue Minister David Parker ordered the High Wealth Individuals survey last year, in a bid to gather information that many assume could be a precursor to the Government proposing an inheritance tax or some other form of wealth tax at or after the next election.

Revenue Minister David Parker discusses a bill which would set out principles of fairness in the tax system (video first published in May).

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Cavill said it had been unable to make contact with the 14 individuals despite having “email and/or physical addresses” for the people who were required to participate in the survey when the information-gathering exercise kicked off.

“We also had tax agent details for some of those high-wealth individuals.

“The project team tried contacting the high-wealth individuals using all available contact details, including those for their tax agents,” she said.

The survey is now drawing to a close, with IR having sent out a form last month with what will for most of the rich-listers be the last set of questions they need to answer.

IR said it tried contacting the high-wealth individuals using “all available contact details, including those for their tax agents”.

Cavill wouldn’t say whether IR went as far as attempting to door-knock any of the 14 wealthy individuals it had not heard back from, or whether IR had now abandoned its efforts to reach them.

There is no general legal obligation for people to provide up-to-date contact information to Inland Revenue, but the Tax Administration Act stipulates that an IR notice to someone’s last known address is “an effective notice”, she said.

“Therefore, in order for Inland Revenue to give legal notice of its actions an up-to-date address is not strictly necessary.

“It is therefore in the taxpayer’s interests to update their address and contact information so that they are aware of any actions that IR may be taking or contemplating in regard to their tax affairs,” she said.

Deloitte tax partner Robyn Walker says Inland Revenue may need to ask whether enforcement action is worth the fight.

Parker told a select committee last week that IR remained on track to report the results of the survey next year.

The goal was to “better understand the tax rates paid by the very wealthiest New Zealanders”, he said.

The exercise kicked off in earnest in November, when IR wrote to 406 people who it believed had a net wealth of more than $20 million, seeking details about their family connections.

But 30 people were excluded from the project on compassionate or other grounds.

The third, and for most people final, 21-page form was sent to the remaining individuals and their partners last month, seeking a wide range of financial information, much of which would not normally be known to the tax authority.

That included information on inheritances and gifts the high-wealth individuals and their partners had received over previous decades since 1970, “rounded to the nearest $1m”, and information on their trusts, investments and property interests.

IR also asked for rough estimates of their annual spending, separating out their spending on items including houses, cars, overseas travel and financial products, so it could estimate the GST they may have paid.

Responses to that survey are due by August 24.

Tax Justice Aotearoa chairperson Glenn Barclay said it would have been better if the survey was able to include data from all the high-wealth individuals IR had chosen to contact.

Barclay did not have views on whether enforcement action would be warranted if rich-listers had ignored the survey, but agreed that if that was the case then IR might have reason to consider auditing those individuals.

Deloitte tax partner Robyn Walker said the question IR might need to ask when considering enforcement action was whether it was worth the fight.

“It comes down to what is the best use of resources and whether it is better for the IR team working on the project to just get on with analysing the considerable amount of data that they have got.”

Taxpayer behaviour was something that was considered when IR was considering audits, she said.

But high-wealth individuals received a high level of scrutiny already and previous comments from IR indicated they were a “very highly compliant group as a whole”, she said.