Inland Revenue says automatic exchange of information with other tax jurisdictions around the world is proving a potent tool in the fight against tax evasion.
IR’s International Revenue Strategy Manager, John Nash, says New Zealand is one of many jurisdictions committed to a global initiative led by the Organisation for Economic Co-operation and Development (OECD) on the automatic exchange of financial account information.
“Using the Common Reporting Standard, all reporting financial institutions have to identify and collect information on accounts held by account holders who are foreign tax residents. In certain circumstances, that also includes entities that are controlled by foreign tax residents.
“New Zealand started this automatic exchange of information in September last year and we’ve received more than 1.5 million records on New Zealand tax residents from 74 jurisdictions.”
John Nash says Inland Revenue is now following up on the information received.
“We’ve been analysing the information against the information we hold in our systems.
“Where we see a mismatch between offshore income disclosed in tax returns and the data we now hold from our tax treaty partners, we’re reaching out to customers to give them an opportunity to provide explanations or submit a voluntary disclosure before we undertake more in-depth reviews and investigations.
“A major advantage in making a voluntary disclosure, rather than waiting for us to find any discrepancies through our investigative process, is that any penalty charged on any related tax shortfall may be significantly reduced. In some cases, this may be up to a 100% reduction.
“Failure to declare offshore income or make appropriate disclosures about international business activities is tax evasion. Coming forward now by way of voluntary disclosure is definitely the better option rather than being found out later.
“Our expectation is that the information we are receiving from overseas will continue to grow. Combined with improved analytics it will make it even easier for Inland Revenue to identify offshore tax evasion.
“Offshore is definitely no longer ‘off limits’ as far as tax compliance is concerned," John Nash says.