Govt wants IRD to raise more money from tax audits

Tuesday, 13 February 2024

Tax dodgers beware, an Inland Revenue Te Tari Taake audit crackdown may be on the way.

Speaking at the Finance and Expenditure Select Committee on Monday, Finance Minister Nicola Willis signalled Inland Revenue audit revenue was one of the Government’s hopes for raising extra revenue.

“We are progressing work on new revenue measures, including immigration levies, gambling taxation, and the Inland Revenue Department audit programme,” Willis told the committee.

The immigration plan, and the intention to raise money by taxing offshore casino operators targeting New Zealand gamblers, have both been previously publicised by the Government.

The hearing was sometimes testy, with Willis aiming jibes at former finance minister Grant Robertson.

Robertson, who is a member of the committee, asked Willis about her pre-Christmas mini-budget asking if it was really just composed of four press releases put out on December 20.

Willis fired back, saying the mini-budget had identified $7.5 billion in spending cuts.

“The last government did quite an extraordinary effort in releasing lots of pages of guff, but I can’t think of an instance when you delivered $7.5b of savings so I will be judged on the substance not the number of pages,” she said.

Willis also used the hearing to signal that Budget 2025 would be the first “social investment” budget. The 2024 Budget would be delivered on May 30.

Social investment is a concept initially championed by former National prime minister Sir Bill English.

Deloitte describes social investment as “government activity undertaken on the basis of a return on investment justification” with data used to quantify a social problem, including the long-term costs to individuals and government.

Under the social investment model, agencies seek funding for interventions based on the extent to which future costs to government are reduced by improving social outcomes, and whether their success is measured.

Willis said the Government had begun building the “architecture” for delivering a social investment approach across government spending.

“That’s the work we have underway, so that by next year’s Budget, we can take an approach that is firmly anchored in social investment,” she said.

She defended the approach, telling the committee: “What’s frustrated New Zealanders in recent years is they have seen the spending going up. They have seen the debt go up. An 80% increase in spending since 2017, and yet they haven’t seen a commensurate increase in public services.”

Instead, she said, they had seen falling education standards, longer healthcare waiting lists, and an increase in violent crime.

“I put it to you this way; sometimes people think that delivering value for money is somehow unkind. Well, I put it to you that every dollar of public money that isn’t making the maximum impact for New Zealanders is a dollar we could be spending with more impact,” Willis said.

The Inland Revenue’s briefing to the incoming minister (BIM) said that as a consequence of resources being directed to deliver Covid-19 support, it reduced activity in “proactive compliance activity”.

That had seen it save the taxpayer $351 million in various Covid support payments that it identified the 79,200 applicants had no right to get.

Resources were now being redirected back to proactive compliance, the BIM said.

The department’s last annual report showed that in the financial year ending June 30, it identified $973m in revenue through its range of compliance activities.