Facts and figures as Inland Revenue reports on its performance

By Veronica Harley 

Recently, Inland Revenue released its 2016 Annual Report.  It’s a document that‘s full of facts and figures that not only explains how much revenue has been collected and where it has been spent, but also sets out performance targets and results and outlines the Department’s strategic intentions.  It’s also a large document of 140 pages so we’ve summarised a few key facts and interesting takeaways below.  That said, the document is not unsurprisingly presented to give a positive view of Inland Revenue’s performance against targets.

Protecting New Zealand’s revenue

This year $63.4 billion in tax revenue was collected.  The diagram shows a breakdown of the main revenue sources.

In order to protect New Zealand’s revenue, focus has been on areas of non-compliance which includes the hidden economy, property, employer deductions and aggressive tax planning arrangements by international and multinational organisations.  Differences of $1.2 billion were identified through investigations.  Specifically:

• Readers may have noted the recent marketing campaign focusing on the hidden economy and in particular on the construction and hospitality sectors where there is a greater risk of people not reporting cash revenue;
• There has been emphasis on residential property speculation in new developments, particularly in Auckland.  Regions and some suburbs with high property turnover are being closely monitored.  An agreement signed with Land Information New Zealand in October 2015 enables it to send information collected from property buyers and sellers to Inland Revenue;
• A new specialist team was put in place to help investigate employer compliance concentrating on unpaid employer deductions (i.e. PAYE. KiwiSaver, child support and student loans) with particular emphasis on those employers making deductions but not passing them on to Inland Revenue;
• Several long running aggressive tax planning litigation and dispute cases were successfully closed during 2015-16.  These included an international financing case and another case where a promoter of a tax avoidance scheme had a $17 million penalty imposed;
• There is an extensive international compliance program in place to address base erosion and profit shifting (BEPS) issues such as international pricing and financing arrangements.  The report notes that “this year we have seen good compliance from multinationals in respect of their international tax planning arrangements”, and
  
• Inland Revenue has a “significant enterprises” compliance program focussing on nearly 600 taxpayer groups, 50% of which are foreign-owned with a further 25% involved in international operations.  There is acknowledgement that these organisations make a significant contribution to New Zealand’s revenue – over $6 billion of tax. Performance data from this segment is closely monitored, including tax payments, operating margins and interest expenditure.