Government moves to collect more bulk data from payment service providers
Tax Alert - August 2021
By Troy Andrews & Vicky Yen
Inland Revenue will soon be using its powers to collect regular bulk datasets on electronic payments from banks and other payment service providers.
New regulations have been proposed in a government Discussion Document released on 6 July 2021, “Regular dataset collection from payment service providers”, requiring payment service providers to report prescribed information on electronic payments between customers and merchants to Inland Revenue on a quarterly basis. Failure to provide the information may be an offence with criminal penalties ranging from fines to imprisonment.
The information will include aggregated transactions and account information for each merchant (each entity or person that is engaged in a business activity). Individual customer transactions and payment data will not be collected or identifiable, however merchants’ identification and personal information may be collected, including bank account numbers, phone numbers, addresses, IRD numbers, and date of births.
Inland Revenue previously only had the power to request this information on an ad hoc basis; now Inland Revenue is able to collect this information continuously. These proposals will allow for collection of the same information on a regular basis and from more payment service providers, subject to only a few limited exemptions (reporting is not required from payment service providers who have subcontracted to another provider, and information does not need to be reported in relation to “large” merchants with over $30 million in payment values, nor on bank-to-bank payments such as direct debits, which will be subject to a separate round of consultation). Officials have communicated that the information collected will only be used by Inland Revenue to verify business income, however given the broad-reaching nature of the proposals we believe Officials should provide further assurance that the data collection process will be appropriately targeted and the information used only for clear, specified purposes.
The proposals are intended to provide more certainty and transparency on the types of information being shared with Inland Revenue, and allow Inland Revenue to offer improved services and support. Examples of benefits referred to in the Government Discussion Document include the ability for Inland Revenue to notify businesses to promptly register for GST once they reach the turnover threshold (based on payment data), and to establish industry benchmarks which can trigger investigations and prevent tax avoidance from being a competitive advantage for certain players in the market.
However, the additional frequency and volume of data sharing may give rise to significant compliance costs for payment service providers, including on the set up and maintenance of appropriate data collection, reporting, and security related processes. Some of the additional compliance costs may inevitably be passed on to private businesses.
There appears to have been limited consultation on the proposals to date, with various payment service providers now unexpectedly facing additional compliance costs and the threat of potentially disproportionate penalties for non-compliance. It is hoped that from here onward Officials will engage in wider consultation to ensure the proposals do not introduce unnecessary compliance burdens, and that affected parties will be allowed sufficient time to prepare and update their systems.
As mentioned above, this round of consultation relates to the first use of Inland Revenue’s enhanced data collection powers, we expect more industries may also find themselves being on the receiving end of information requests in due course.
The Government Discussion Document sets out more detail on the proposals, and invites submissions on the proposals to be made by 20 August 2021.
August 2021 Tax Alert contents
- What’s on the tax policy agenda?
- Extra tax could be payable on Australian software sales
- New OIO rules require acquisition structure and other tax-related information to be provided up-front
- Balancing risk and control in a COVID-19 world
- Are you ready for shovel-ready?
- Can I claim my lunch as a tax deduction?
- The great ute FBT debate
- Government moves to collect more bulk data from payment service providers
- The Inland Revenue FIF calculator still missing in action
- Snapshot of recent developments