IRD High Wealth Research Project

By now you will have heard that the Labour Government / IRD is proposing to send out letters to 400 selected high wealth individuals and their spouses. It's part of a research project to see how rich the rich are and how much tax they pay.

The section that gives the IRD power to conduct research projects was passed under urgency recently and was not subject to the usual full consultation process.

Clearly, the Labour Government / IRD is looking at either a wealth tax or yet another crack at a capital gains tax. Either way, they are gathering data to make sure that they can accurately forecast the yield or collection from such changes, and to make sure it is properly targeted.

We consider the only good thing about all of this is that the IRD has forewarned the tax agents, who no doubt, like us, will be fielding a lot of calls from soon to be very angry clients.

With Auckland in level 3 lockdown, their timing is incredible to start with. Clearly, no one at the IRD involved in the project has even thought about the mental stress this will cause, or they believe that being rich they can at least afford private counselling, albeit on zoom while locked down.

We are looking at the penalties for telling the IRD to simply piss off. Given the Government's track record for covid breaches that may not be an unreasonable answer. Section 145 of the Tax Administration Act imposes a penalty not exceeding $15,000 for the first offence, and up to $25,000 for second and subsequent offences. One would argue that not complying with the whole project was a single offence, notwithstanding that the IRD intends to send at least 3 letters separately plus the warning letter.

The IRD may also consider that it has the power to force taxpayers to comply under section 17H, again a recently changed section, I do not necessarily agree that the IRD will have the stomach or the resources to pursue large scale non-compliance, let alone individuals who would cost the IRD a lot to pursue one on one. Just ask Bishop Tamaki or those breaching the borders.

So if you are affected or have clients affected be very careful of what you are about to receive and answer.

We live in very very interesting times.

Please feel free to contact us if you are affected by the current IRD project and require assistance to manage it.

Keep safe.
Nigel Smith