It's Time for the IRD to Stop Chasing the Wealthy

It was recently announced that the Government is setting up a specific unit within the IRD tasked with pulling together harder, higher definite information on the distribution of wealth and how it is acquired. The theory behind this is that it is needed to underpin policy advice on ensuring the tax system operates fairly.
What it is really about is trying to understand how wealthy the rich are, and how much tax they pay.

The IRD already has a specific unit that focuses on high wealth individuals and families. It has had it for a long time and it has been relatively effective for them. Rich listers get their own personal IRD auditor that keeps an eye on them and reviews their returns on a regular basis. The tools available to the IRD are also quite impressive. We have seen first-hand just how detailed the information is that the IRD can pull together on a family group and the companies, properties and other assets that it holds.

What the IRD and more importantly the Government needs to focus on is that the rich do generally pay the correct amount of tax. In our experience rich list reviews from the IRD seldom, if ever, find significant amounts of tax that should have been paid that wasn’t. The reason for this is that rich listers are more able to structure their affairs correctly and do take appropriate professional advice.

The fact that they may pay relatively less tax is not through any great creativity of their own part. Instead, it is because that a large part of their supposed income is derived from capital gains on the sale of land, shares and businesses that are not subject to income tax in New Zealand under the rules that we currently operate under. So either this new unit is looking to set up a wealth or death tax for the future, or the capital gains tax is again back on the table.

The Government and the IRD can do either of these if they wish to, but at the end of the day, it is time to stop banging on about the wealthy not paying enough tax in New Zealand. For years the IRD has reviewed them and it continues to do so. The IRD should also be able to tell you that on most of these reviews, they don’t collect a lot of tax because the tax was correctly calculated and paid in the first place.


Nigel Smith