Robyn Walker, tax partner at Deloitte, is welcoming the repeal. Photo: Supplied / Deloitte
Accountants are divided on whether a repeal of Inland Revenue information-gathering powers is a positive thing.
As part of the new omnibus tax bill, which Revenue Minister Simon Watts announced on Tuesday, the section of law that gave Inland Revenue the power to request information for the purpose of tax policy development is to be repealed.
It was part of Inland Revenue's 'wealth project' which sought financial and personal information about high-net-worth individuals.
Robyn Walker, tax partner at Deloitte, said the repeal was welcome.
"The section was introduced to give Inland Revenue fulsome powers to collect any information it considered helpful for tax policy development; however, its actual use has been invasive and has run the risk of politicising Inland Revenue, so its repeal is welcome."
She said some of the information sought as part of the wealth project was very personal, including details of people's relationships.
"The repeal of this rule doesn't stop Inland Revenue collecting data using its other existing powers and more conventional measures. Inland Revenue has extensive powers to collect any information in relation to a person's tax position and compliance with existing tax laws.
"What the repeal of the rules means is that information which is irrelevant to a person's tax positions is out of bounds.
"There was no restriction on what information could be collected under the law, instead it required that 'a person must … provide any information that the Commissioner considers relevant for a purpose relating to the development of policy for the improvement or reform of the tax system'.
"While the actual use of the provision has been limited, the clause could have been used to procure any information."
She said, as an example, if the government had been looking at exempting food from GST, Inland Revenue could have used that power to force people to give details of what food they bought at the supermarket each week.
But John Cuthbertson, tax and financial services leader at Chartered Accountants Australia New Zealand, said his organisation had previously called out Inland Revenue and the government for not having appropriate or sufficient data in relation to tax policy work.
"Therefore we have always supported the provision to gather data for policy work, which was what that new provision was doing.
"The issue then becomes whether their other information gathering powers are sufficient … they're typically related to disputes with taxpayers or requesting information for a particular purpose rather than a more general purpose of policy development.
"We have asked them to have evidence and robust data in relation to developing good tax policy and then historically that hasn't always been there … clearly there are trade-offs and you want to ensure that whatever you're asking of taxpayers in terms of policy development isn't going to be super costly in terms of time, effort and resource.
"There's a trade-off there. But if you recognise that trade off and make sure you're asking for information appropriately and taking into account compliance costs, then I think that it still would be useful to retain it."
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