GST laggards, wealthy migrants in tax department's sights

The tax department is using big data analysis to "reliably predict customers who are highly unlikely to file GST returns on time" and try to help.

It will also use the analysis for its investigators to single out "high-income individuals, in particular high-income new immigrants" for special attention in the year ahead.

The Inland Revenue Department annual report says "we have changed our processes based on our findings", resulting in "a reduction of more than 98,000 outstanding GST returns during the past year" and plan to contact such customers proactively to try and minimise late filing.

The initiative is just one indication of how digitised the tax system is now becoming. The numbers of businesses switching to online payments and interaction with the IRD has grown by leaps and bounds over the past three years. It has been accompanied by improving satisfaction and performance ratings, along with the first reduction in total overdue tax outstanding in five years.

Online GST return filings have risen to 64% of the total in 2014/15 from 47.6% in 2012/13, and employer monthly schedules delivered online have increased to 60% from 41.3% two years earlier. Income tax returns were already highly digitised by 2012/13 at 84.1% of the total, rising to 88.8% in the latest year.

The number of outstanding tax returns of all kinds was down 21.5% in the year to June, continuing a downward trend to the lowest number in five years.

The department's pursuit of tax dodgers has also borne plenty of fruit, with action examining complex finance and trust losses yielding "discrepancies" of $191.1 million, for a return on investment for the IRD of $34.10 in tax collected for every $1 spent on investigation. 

The department targets an $11.60:$1 ratio and total discrepancies identified in actions "to counter aggressive tax planning" during the year contributed $336.9 million toward the total discrepancies result.

A string of successful cases against Australian companies that used mandatory and convertible note vehicles funding debt and equity when purchasing New Zealand assets in the early 2000s had yielded total revenues of $156.1 million.

Particularly fruitful was action on old cases involving large sums, with $536 million of extra revenue pulled from focusing on "high value and older cases."

For the moment, the department is focusing its efforts on "specific areas of non-compliance such as aggressive tax planning, property and the hidden economy and received further funding in Budget 2015 to expand its investigations activity in these areas. That funding will also be applied to "addressing emerging risks such as high-income individuals, in particular high-income new immigrants."

It says reaction to a campaign last year in just four Auckland suburbs, aimed at tax evasion through cash jobs in the building industry, "was fast, with tax agents reporting a large number of calls from people looking to add cash jobs to the information they had submitted to us."

Total outstanding tax debt was $5.2 billion, down 5.8% on the year and now at the same level as in 2011. 

The report shows a ballooning liability relating to unpaid child support, where total outstanding tax is $3.3 billion, compared with $2 billion in 2010, of which 79% is unpaid penalties. 

Efforts to improve compliance with student loan debt repayments by overseas students appear to be having some effect, with a 47% increase in payments received from that source year on year.

(BusinessDesk)