7 May 2018

IRD missing out on $1 billion in tax from unreported income

2:12 pm on 7 May 2018

Tax Freedom Day has come two days later than last year, because of people edging into the next higher tax bracket, increased spending, and higher prices.

IRD; Tax Code Declaration

Photo: RNZ / Richard Tindiller

Accounting firm Staples and Rodway calculated the hypothetical day when a taxpayer paid their dues in sales and income tax and kept the rest of their income.

The tax-free day pushed statutory group Chartered Accountants Australia and New Zealand to highlight the substantial amount of tax being missed by the Taxation Working Group (TWG).

It said there was an estimated $1 billion in tax not being paid by those self-employed, who do jobs under the counter for cash, and also in unreported company income.

Chartered Accountants Australia's tax expert for New Zealand John Cuthbertson said $1bn was a conservative estimate and other unreported company income would add another $200,000,000 in tax.

"There's a cost to this behaviour and that cost is less money for health and education, social housing and the huge range of government services in need of more money. It's an added burden on people who fulfil their duties as taxpayers."

The group said more work was needed to be done collecting tax from those in the cash or grey economy, before new taxes were imposed.

Among other suggestions from the group were simplifying tax and tax compliance for small businesses; reducing the reliance on taxing individuals; an independent service to protect taxpayers' rights and act as a circuit breaker for disputes with Inland Revenue; and no 'corrective' taxes such as a sugar tax.

The cancellation of the former National-led government's tax cuts also meant people were paying more for longer.

Staples Rodway tax director Mike Rudd said there was a positive outlook from the government's plans for taxes.

"What's encouraging is that the government has indicated it intends to take a sensible approach to spending and avoid incurring significant debt, as well as making no changes to company or individual tax rates," Mr Rudd said.

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